Payment Liquidity in the Light of Changes in the Central Bank Toolkit

Abstract

This study examines the impact of the changes implemented by the Magyar Nemzeti Bank in the central bank toolkit on the liquidity of payment system1 participants over the period between 2020 and the end of 2023 H1. In response to the economic challenges of recent years, the central bank toolkit changed significantly during the period under review. While the economic and financial crisis stemming from the Covid-19 pandemic required interbank liquidity expansion measures, in 2022 steps to absorb excess liquidity were necessary to fine-tune monetary transmission and achieve and maintain price stability. The analysis focuses on the impact of specific toolkit adjustments on the liquidity of the payment system, while also demonstrating why interbank liquidity is separated from payment system liquidity, and which toolkit modifications have typically had a significant impact on the liquidity of the payment system.