Abstract
In the study we investigate the effectiveness of the National Bank of Poland in counteracting the negative results of the financial crisis in the Polish interbank market. The situation was exceptional in a sense, that during the period of the financial crisis the Polish interbank market experienced liquidity surplus, and the main problem of the central bank was to regain confidence among commercial banks and stimulate interbank transactions. We concentrate on the spread between the rate of overnight interbank loans and the reference rate and based upon its dynamics we assess the monetary policy of the Polish central bank. Using econo- metric techniques we study how the central bank influenced the spread, when its control over it weakened and when was it strengthened. The study is supported by the results of the survey directed to the headquarters of commercial banks. We conclude that the ability of the central bank to control overnight rate was The views in this paper should be regarded as those of the author, and do not necessarily reflect those of the National Bank of Poland.
Highlights
The aim of the research was to assess the ability of the Polish central bank to control the rate of overnight loans in the Polish interbank market and conduct its monetary policy during the confidence crisis, as well as facing the liquidity surplus
In the study we investigate the effectiveness of the National Bank of Poland in counteracting the negative results of the financial crisis in the Polish interbank market
Banks preferred to keep their surplus on their current accounts with the central bank or in the form of deposit facility, and they significantly limited participation in the 7-day open market operations conducted by the National Bank of Poland (NBP) (National Bank of Poland 2009)
Summary
The aim of the research was to assess the ability of the Polish central bank to control the rate of overnight loans in the Polish interbank market and conduct its monetary policy during the confidence crisis, as well as facing the liquidity surplus. We analyze the spread between the POLONIA rate and the reference rate in shorter periods which allows us to follow the changes of the effectiveness of the stabilization policy of the National Bank of Poland. Apart from the basic open market operations, the NBP provided the standing facilities, allowing commercial banks to manage short-term liquidity using the marginal lending facility (lombard credit). Another instrument of the central bank’s monetary policy is the required reserve system. It is calculated—and published every day at 5 pm—as an average of overnight interest rates weighted by all the overnight transactions performed up to 4 pm during this day
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