Liquidity on euro area money markets and unconventional monetary policy
| Thesis title in Czech: | Likvidita na peněžním trhu eurozóny a nekonvenční monetární politika |
|---|---|
| Thesis title in English: | Liquidity on euro area money markets and unconventional monetary policy |
| Academic year of topic announcement: | 2011/2012 |
| Thesis type: | diploma thesis |
| Thesis language: | angličtina |
| Department: | Institute of Economic Studies (23-IES) |
| Supervisor: | PhDr. Tomáš Adam, Ph.D. |
| Author: | hidden - assigned by the advisor |
| Date of registration: | 22.06.2012 |
| Date of assignment: | 22.06.2012 |
| Date and time of defence: | 28.01.2014 00:00 |
| Venue of defence: | IES |
| Date of electronic submission: | 06.01.2014 |
| Date of proceeded defence: | 28.01.2014 |
| Opponents: | prof. PhDr. Tomáš Havránek, Ph.D. |
| Advisors: | PhDr. Tomáš Adam, Ph.D. |
| URKUND check: | |
| Guidelines |
| My thesis will be divided into following sections. In the first one, I will present definitions and used terminology. Then I will discuss unconventional monetary policy tools and ECB operations.
In the third part I will introduce the model decomposition of unsecured rates according to Antonio De Socio (2011). The following part will be focused on comparing the results with the analysis by Murphy (2010). In the last part, I will use a VAR analysis for the estimation of impact of long-term refinancing rate operations on liquidity and credit components. |
| References |
| De Socio, Antonio (2011): The interbank market after the financial turmoil: squeezing liquidity in a “lemons market” or asking liquidity “on tap”. Rochester.
Benecká, Soňa (2012): Likviditní riziko na peněžním trhu eurozóny a operace ECB, Globální ekonomický výhled – leden, ČNB, online (10/7/2012). WWW: http://www.cnb.cz/miranda2/export/sites/www.cnb.cz/cs/menova_politika/gev/gev_2012_01.pdf Murphy, F., Murphy, B. (2010): A vector-autoregression analysis of credit and liquidity factor dynamics in US libo rand Euribor swap markets. Journal of Economics and Finance;36(2):351-70. Lütkepohl, Helmut (2005): New Introduction to Multiple Time Series Analysis. Corr. 2nd print. Berlin: Springer, 2005. ISBN 35-404-0172-5. |
| Preliminary scope of work in English |
| My thesis will focus on liquidity on the euro money markets and to what extent it can be influenced by instruments of the unconventional monetary policy. As the last financial crisis showed, a sudden drop in trading on unsecured money markets represents a severe threat to the stability of the financial system. The lack of confidence leads to lower availability of external financing with a potential of liquidity crisis being transformed into solvency crisis.
Therefore understanding the evolution of money market rates and their driving forces (liquidity or credit risk) is a key question for any central bank. These tend to react on this situation by decreasing their basic rates along with supplying liquidity through refinancing operations, which are considered as instruments of unconventional monetary policy. The pressure on policy makers in euro area has even increased since the start of debt crisis. Sovereign rating downgrades of several euro area countries caused the evaporation of high quality collateral and secured money market segment lost its financing function. My thesis will be divided into following sections. In the first one, I will present definitions and used terminology. Then I will discuss unconventional monetary policy tools and ECB operations. In the third part I will introduce the model decomposition of unsecured rates according to Antonio De Socio (2011). The following part will be focused on comparing the results with the analysis by Murphy (2010). In the last part, I will use a VAR analysis for the estimation of impact of long-term refinancing rate operations on liquidity and credit components. Introduction 1. Theoretical background 1.1. Definitions of used terminology 1.2. Unconventional monetary policy tools and ECB operations 1.3. De Socio (2011) model 1.3.1. Introduction 1.3.2. Data and variables 1.3.3. Decomposition 1.4. Murphy (2010) analysis 1.4.1. Introduction 1.4.2. Methodology 2. Empirical part 2.1. Decomposition according to De Socio model 2.2. Results comparing with Murphy analysis 2.3. VAR analysis - estimation of impact of long-term refinancing rate operations on liquidity and credit components. 2.4. Results Conclusion Literature |