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Money market microstructure and monetary policy: the Indian experience

Author

Listed:
  • Indranil Bhattacharyya
  • Mohua Roy
  • Himanshu Joshi
  • Michael Patra

Abstract

Money market microstructure has recently started drawing attention in the empirical literature on financial markets of emerging market economies. In the Indian context, a GARCH(1, 1) model shows that policy instruments impact bid-ask spreads in the money market. Volatility of bid-ask spreads seems to be more persistent in the overnight market than in longer maturity segments. The results also suggest the dominance of policy interventions over the market microstructure across the term structure of the Indian money market. Unanticipated policy actions can delay mean reversion and, therefore, the return to stability.

Suggested Citation

  • Indranil Bhattacharyya & Mohua Roy & Himanshu Joshi & Michael Patra, 2009. "Money market microstructure and monetary policy: the Indian experience," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 2(1), pages 59-77.
    • Handle: RePEc:taf:macfem:v:2:y:2009:i:1:p:59-77
    DOI: 10.1080/17520840902726326
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    References listed on IDEAS

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    2. Aries Haryadi & Sahabudin Sidiq, 2013. "Inter-bank call money market transaction in Indonesia," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 5(2), pages 92-98, April.

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