Interbank Market Mechanism Design: Case Study a Case Study of Iran's Interbank Market

Document Type : Research Paper

Authors

Department of Economics, Faculty of Economics, Management and Administrative Sciences, University of Semnan, Semnan, Iran

Abstract

In this study, we introduced various mechanisms that the central bank can use to predict the demand for liquidity in the interbank market. Simulating standing facilities and revenue in each mechanism from the 14th of October 2020 to the 25td of October 2022 in Iran showed that the higher the trading cost, the lower the volume of transactions in the interbank market, and most banks turn to standing facilities to meet their liquidity needs. The degree of interdependence of reserve requirements between banks, the uncertainty of banks regarding their private reserve requirements, and trading costs in the interbank market play a key role in choosing the best and most efficient mechanism.  
JEL Classification: C63, D02, D44, E44, E52, E58

Keywords

Main Subjects

References

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History

  • Receive Date: 01 December 2022
  • Revise Date: 26 May 2023
  • Accept Date: 02 June 2023

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