Reverse Repo Research Articles

Effect of Open Market Operations on Income Inequality

Inequality is particularly relevant for public debates on the disaggregate implications of economic policies since they might have distinct effects across different segments of the population. Impact of monetary easing on inequality have recently attracted increasing attention especially in developing countries. This article examined the effect of open market operations on income inequality in Kenya. A quantitative research design method was adopted. The study utilized a quantitative cross-sectional data from the Kenya Continuous Household Survey Programme (KCHSP) for the years 2020 and 2021. Stepwise regression, forward selection model was executed with a threshold of 0.2. Further, the study was supported by Permanent Income Hypothesis, Kuznets Hypothesis and the modernization theory. Income inequality, measured by the Gini coefficient, was the dependent variable. Open market operations (repo, and reverse repo) was the independent variable in the model. The male headed households had a Gini coefficient of 0.58 while a Gini coefficient of 0.59 was attributed to female headed households, across the 47 counties. The results showed that open market operations (reverse repo) had a coefficient of 0.022, p=0.026< 0.05 which was positive and statistically significant at 5% level. The findings indicate that in order to effectively manage income inequality in the country, policymakers should adopt an interdisciplinary and multifaceted approach. This approach should take into account the differential impacts of various policy instruments on income distribution, with a particular focus on demographic segmentation. Additionally, policymakers should combine careful adjustments to monetary policy with targeted social and fiscal measures. These measures should be continuously informed by rigorous data analysis, with the aim of fostering a more inclusive and equitable economy.

Treasury Bill Shortages and the Pricing of Short‐Term Assets

ABSTRACTWe propose a model of post‐Great Financial Crisis (GFC) money markets and monetary policy implementation. In our framework, capital regulation may deter banks from intermediating liquidity derived from holding reserves to shadow banks. Consequently, money markets can be segmented, and the scarcity of Treasury bills available to shadow banks is the main driver of short‐term spreads. In this regime, open market operations have an inverse effect on net liquidity provision when swapping ample reserves for scarce T‐bills or repos. Our model quantitatively accounts for post‐2010 time series for repo rates, T‐bill yields, and the Fed's reverse repo facility usage.

STUDY ON IMPACT OF INTEREST RATES ON THE STOCK MARKET

This study set out to investigate and focus on the effect of interest rates on stock markets, namely the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE), with the aim of increasing knowledge. All of the secondary data included in this study came from reliable exchanges and was collected over a five-year period between 2019 and 2023. The Reserve Bank of India [RBI], which collects daily and monthly prices of several stock indexes, was another source of interest data. The Unit Root test, Johansen’s Co-integration test, and ARCH models were examined using the statistical program EViews 12, were employed to calculate the outcomes and determine whether there was a long-term positive or negative association between the variables. For this study, interest rates such as bank rate, repo rate, and reverse repo rate are measured as independent variables, and stock prices such as BSE Bank, and NSE Bank are measured as dependent variables. This study will be useful to investors, financial managers, and other experts in the field of finance.

THE IMPACT OF CENTRAL BANK’S MONETARY POLICY ON THE INDIAN STOCK MARKET

This study examines how the monetary policies of the Central Bank affect the Indian stock market, with a particular emphasis on the Nifty 50 index. The analysis investigates the relationship between important monetary policy tools, such as the repo rate and reverse repo rate, and stock market movements using econometric approaches, such as Granger causality tests. The study's conclusions underscore the significance of taking into account a variety of channels and time dynamics by revealing substantial but complex relationships between monetary policy actions and the Nifty 50 index. Although Granger causality is evident in some cases, relevant confounding variables should be taken into consideration when determining causal links. The study emphasizes the necessity of more research on the processes of transmission and the wider effects of monetary policy on financial markets. Keywords: Central Bank, monetary policy, Indian stock market, Nifty 50 index, Granger causality, repo rate, reverse repo rate.

The Influence of Deposit Interest Rates, BI 7 Day Reverse Repo Rate and Inflation on the Composite Stock Price Index in BEI during the 2020 - 2022 Pandemic

The aim of this research is to determine and understand the potential relationship between inflation, BI 7-day reverse repo rate, and deposit interest rates on the JCI movement in 2020 to 2022. The research approach used is a quantitative descriptive variation. This method uses three years of observational secondary data, to be precise from 2020 to 2022. Using Eviews 12 software, statistical tests and multiple regression analysis techniques are used in the data analysis process. The findings of this study show that the BI 7-day reverse repo rate and deposit interest rates both have quite a large and beneficial influence on the JCI movement. These results provide important information regarding stock market dynamics and economic variables that influence fluctuations in the IHSG value during the specified research period.

THE INFLUENCE OF MACROECONOMIC VARIABLES ON THE INDONESIAN SHARIA STOCK INDEX PERIOD 2018 – 2022

Abstract
 This study aims to examine the effect of inflation, exchange rates, the BI-7 day reverse repo rate, and world oil prices on ISSI. The research method used is a quantitative method. The samples used in this study were 12 companies registered with ISSI. The data analysis technique in this study used panel data regression with the stages of the Chow test and the Hausman test. As well as testing the hypothesis with the stages of the f test, t test, and the coefficient of determination (R2). The results of this study prove that inflation has a significant negative effect on ISSI. The exchange rate has no significant effect on ISSI. BI-7day reverse repo rate has a significant negative effect on ISSI. And world oil prices have a significant positive effect on ISSI. The conclusion is that simultaneously inflation, exchange rates, BI-7 day reverse repo rate, and world oil prices influence the ISSI for the 2018 - 2022 period.
 Keywords: BI-7 day reverse repo rate, World oil prices, Indonesian sharia stock index, Inflation, Exchange rate

Sharia Monetary Policy: Facing the Recession, Saving the Economy

The Economic Recession (economic slowdown, layoffs, undeveloped investment) has haunted the economy. Inflation is high, the rupiah exchange rate is weakening. The central bank is a strategic institution that regulates the country's economy through monetary instruments, one of which is Islamic monetary instruments. This paper aims to elaborate on Bank Indonesia's sharia monetary instruments in saving the economy as a result of the world economic recession. This paper is reviewed with a qualitative approach and a type of literature study. The results of this paper show that the Central Bank in an effort to deal with the world economic recession has issued Islamic and conventional monetary policies. Sharia monetary policy includes implementing open sharia monetary operations in the form of Bank Indonesia Sharia Certificates (SBIS), Bank Indonesia Sukuk, SBSN Repo, SBSN Reverse Repo, Standing Facility and Financing Facility. This policy has an impact on the economy growing by 5.03% in the third quarter of 2023. The practical implications of this paper encourage Bank Indonesia to maximize sharia monetary policy within the framework of improving economic conditions at both the financial institution level and economic circulation in society.

A Study on the Impact of the Policies of Reserve Bank of India and Federal Reserve System of the United States on Their Respective Economies

This abstract summarizes a study that investigates the impact of various policy changes made by central banks on the economies of India and the USA. The focus is on the Reserve Bank of India and the Federal Reserve System of the US. The primary objective is to analyze the relationships between different economic factors and the country's economic indicators, such as GDP, WPI, SLR, PPP, PCI, BOP, CRR, OMO, Repo, Reverse Repo, and interest rates. Data was collected from reliable sources, including the World Bank and RBI, covering a 12-year period from 2010 to 2021. The statistical analysis involved correlation and regression using SPSS software. In India, the study finds that Bank Lending Rate, Cash Reserve Ratio, Statutory Liquidity Ratio, Repo Rate, and Reverse Repo Rate exhibit negative correlations with GDP, PPP, WPI, PCI, and BOP. Conversely, Open Market Operations in India show positive correlations with these economic indicators. In the United States, Bank Lending Rate is positively correlated with GDP, PPP, WPI, and PCI, but negatively correlated with BOP. The Discount rate in the US shows negative correlations with GDP, PPP, WPI, and PCI but positive correlation with BOP. Open Market Operations in the US exhibit positive correlations with GDP, PPP, WPI, and PCI but negative correlation with BOP. Finally, the Reserve Ratio Requirement in the US is negatively correlated with GDP, PPP, WPI, and PCI but positively correlated with BOP. The study's findings offer valuable insights into the connections between monetary policy tools and economic indicators in both countries. These insights can aid policymakers and economists in understanding the effects of policy decisions on their respective economies.

Pengaruh Tingkat Inflasi, BI-7 Day Reverse Repo Rate Laba Bersih dan Firm Size terhadap Harga Saham pada Industri Sub Sektor Kosmetik dan Keperluan Rumah Tangga yang Terdaftar di Bursa Efek Indonesia Periode 2016-2020

This study aims to describe the formulation of the problem that has been designed,Namely to analyzed the effect of Inflation Rate, BI-7 Day Reverse Repo Rate, Net Profit and Firm Size simultaneously and partially on stock prices in the cosmetics and household goods sub-sector industry registered at Bursa Efek Indonesia period 2016-2020. The research methodology used is descriptive analysis method and statistical analysis method. The data used is secondary data. Based on the simultaneous test of ftable (3,091>2,76), by comparing the level of significance 0,034>0,05, so that it can be interpreted that simultananeosly the variable inflation rate, BI-7 day reverse repo rate, net profit, and firm size the effect stock prices. Based on the partial test, it can be concluded that the inflation rate variable has no positive and insignificant effect on stock prices, where thitung is 0.919 dan ttable 2,05954 (0,919<2,05954) with a significant level comparison (0,367>0,05), The BI-7 day reverse repo rate variable has no negative and insignificant effect on stock price, where thitung -0,598 dan ttabel 2,05954 (0,598<2,05954),with a significant level comparison (0,555>0,05), Net Profit variable is known to have a positive and significant effect on stock price, where thitungnya 2,814 and ttabel 2,05954 (2,814>2,05954) with a significant level comparison (0,009<0,05), and firm size variable firm has a negative and significant effect on stock, where thitungnya -3,441 and ttabel 2,05954 (3,441<205954) with a significant level comparison (0,002<0,05). The results of the coefficient of determination in this study indicate that the R Square is 0,331 which means that the contribution of the independent variable affects the dependent variable in this study of (0,331x100=33,1%).

Influence of Bi-7 Day Reverse Repo Rate, Gross Domestic Product (GDP), and Industrial Production Index (IPI) on Corporate Sukuk Growth in Indonesia with Inflation as Moderating Variable in 2011-2021

The development of corporate Sukuk, which is relatively small compared to the development of state Sukuk, is the background of this research. This study aims to determine whether there is an effect of the bi-7 day reverse repo rate, gross domestic product, and industrial production index on the growth of corporate Sukuk with inflation as the moderating variable in 2011-2021. This research is a quantitative study with a sample of 44 data in Indonesia for the 2011-2021 period, the results of which are published by OJK, BPS, and BI. The data is processed by software eviews 10. The data analysis tool used is Multiple Analysis and Moderated Regression Analysis (MRA), with instrument tests including Stationary Test and Assumption Test (Normality Test, Multicollinearity Test, Heteroscedasticity Test, and Autocorrelation Test). After the classical assumption test was carried out, multicollinearity symptoms were detected in this study, so to cure these symptoms the researchers removed several variables from the equation model. This is done to obtain a good equation and not bias multicollinearity. With the remaining variables in the regression model, the results of the research show that the bi-7 day reverses repo rate (X1) has a negative and insignificant effect on the growth of corporate Sukuk, and the Industrial Production Index (X3) has a positive and significant effect on the growth of corporate Sukuk, inflation can moderate the effect bi-7 day reverse repo rate and Gross Domestic Product on corporate Sukuk growth (X1*Z and X2*Z).

Bank Deposit Flows to Money Market Funds and ON RRP Usage during Monetary Policy Tightening

Using the historical experience from past monetary tightening cycles and the market-expected path of the federal funds rate for the current tightening cycle, we project that the flows from bank deposits to money market funds (MMFs) would be relatively small, at about $600 billion through the end of 2024, or about 3 percent of current bank deposits. Of these potential inflows to MMFs, about $100 billion are projected to flow into the overnight reverse repo (ON RRP) facility, or about 7 percent of MMFs’ recent take-up. Other factors such as the private demand for repo funding and the net supply of Treasury bills are expected to have more substantial effects on MMFs’ take-up at the ON RRP facility than the inflows from bank deposits.

Pengaruh inflasi dan BI 7-day reverse repo rate terhadap pembiayaan umkm dengan dana pihak ketiga sebagai variabel intervening

This study aims to determine the effect of inflation and the BI 7-day reverse repo rate on MSME financing with Third Party Funds as an intervening variable. Data using secondary data were taken from each bank's official websites, Bank Indonesia (BI) and the Central Bureau of Statistics (BPS). The data taken by researchers is from 2015–2020. The method used in the research uses path analysis. The results of this study indicate that inflation and the BI 7-day reverse repo rate do not affect MSME financing. Meanwhile, Third Party Funds have a positive impact on MSME financing. Inflation and the BI 7-day reverse repo rate do not affect Third Party Funds. In addition, third-party funds cannot mediate the effect of inflation or the BI 7-day reverse repo rate on MSME financing.

ANALISIS DETERMINAN PENGARUH MAKROEKONOMI TERHADAP RETURN SAHAM BANK BUKU 4 DI BURSA EFEK INDONESIA

This study aims to analyze the macroeconomics of Bank BUKU 4 returns. This study uses the Vector Error Correction Model (VECM) using monthly return data for Bank BUKU 4 shares as the assessment variable and monthly inflation data, BI 7-day reverse repo interest rate. exchange rates, exchange rates, money supply, gross domestic product, foreign exchange reserves, and fed funds interest rates, as independent, with a data time span from January 2016 to December 2020. The results show that in short-term inflation, GDP, and variable reserves foreign exchange varies. , and the fed funds rate does not affect stocks. The BI 7 day reverse repo rate and money supply variables have a significant positive effect, and the exchange rate has a significant negative effect on BUKU 4 bank stock returns. In long-term inflation, the BI 7 day reverse repo rate, money supply, GDP, foreign exchange reserves, and The Fed funds rate does not affect stock returns. While the exchange rate has a significant negative effect on stock returns of BUKU 4 banks.

The Effect of Bank Indonesia 7-Day Reverse Repo Rate on Profitability and Banking Capital in Indonesia

Changes in the reference interest rate of Bank Indonesia from the BI Rate to the BI 7-Day Reverse Repo Rate cause differences in the tenor of depositing funds in Bank Indonesia Certificates, percentages, and interest income earned, which will cause differences in bank financial performance, particularly in bank profitability and capital. Bank profitability is measured using ROA, ROE, NIM, and bank capital is measured using CAR. The purpose of this study is to analyze the differences in banking profitability and capital before and after the BI 7-Day Reverse Repo Rate so as to determine the effect of the BI 7-Day Reverse Repo Rate on banking profitability and capital in Indonesia. The sample in this study is 4 bank through purposive sampling at state-owned commercial banks that were registered on the Indonesia Stock Exchange and had published quarterly financial reports at the Financial Services Authority in the period 2012-2020. This study uses non-participant observation methods and the Wilcoxon Signed Rank Test. The results show that there are significant differences in banking profitability and capital in Indonesia before and after the BI 7-Day Reverse Repo Rate, thereby proving that the BI 7-Day Reverse Repo Rate has a significant effect on banking profitability and capital in Indonesia.

Optimization of Portfolio of federal loan bonds and RE-PO trades

Within the framework of the considered model, the Investor can make transactions for the buying and sailing of federal loan bonds (OFZ), as well as direct and reverse REPO deals secured by OFZ. Transactions are made for liquidity management and increasing interest income. This paper discusses the problem of constructing an optimal portfolio of such transactions. The paper considers the approach for the generation of scenarios for OFZ price changes, the mathematical formulation of the optimization problem, the assessment of its dimension depending on the number of assets and the number of scenarios, numerical experiments on historical data and the construction of an efficient portfolio frontier. The generation of scenarios for OFZ price changes is implemented using historical modeling of a parametric zero-coupon yield curve. The optimization problem criterion is the conditional value at risk (CVAR) risk measure. Constraints on the average return and self-financing of the portfolio are taken into account. As a result, the method of portfolio rebalancing without additional investment, the purpose of which is to minimize risk for a given profitability, is proposed. Numerical experiments are based on historical data about active traded OFZ in 2014-2020. The model is close to the real world: it takes into account commissions, repo discount, bid-ask spreads, trade volumes. Numerical results show that a trading strategy based on the introduced model is more profitable on average than investments in individual OFZ with comparable risk. Note that this effect is shown for strategies with high average profit constraints.

Impact of the OMRR Operation in Fighting the Adverse Effects of COVID-19 on the Chinese Stock Market: An Event Study

The outbreak of the COVID-19 epidemic has had an adverse effect on China's economy. This paper uses the event study method to test and measure the impact of the open market reverse repo (OMRR) operation on the Chinese stock market. The results show that the OMRR operation generates a positive daily abnormal return and a positive daily cumulative abnormal return on average for all stocks. The impact is larger for non-state-owned enterprise (non-SOE) firms than for SOE firms, stocks of non-Hubei provinces than those of the Hubei province, and for stocks of the information transmission and technology industry than those of other industries. We suggest that our government implement more prudent monetary policies and more proactive fiscal policies.

Reaksi Pasar atas Pengumuman Penurunan Bank Indonesia 7-Day Reverse Repo Rate

The purpose of this study is to investigate the reaction of the Indonesian capital market to the announcement of a reduction in the Bank Indonesia 7-Day Reverse Repo Rate on the property and banking sectors. This study employs an event study with a seven-day observation period. The sampling technique used was the purposive sampling technique. The sample size for the banking sector was 32 companies, and the sample size for the property sector was 30 companies. Anomaly returns were used to gauge market reaction. The researchers used the paired samples t-test and the Wilcoxon signed rank test to analyze the data. The results for both sectors revealed that no market reaction was detected as a result of the announcement. This may be caused by investors thought that the announcement can’t affect the company's performance in short term and also considering the other sentiments.
 Keywords: BI 7-Day Reverse Repo Rate; Event Study; Abnormal Return; Market Reaction.

Pengaruh Inflasi, BI-7 Day Reverse Repo Rate, Kurs, Jumlah Uang Beredar dan Indeks Harga Saham Gabungan terhadap Nilai Aktiva Bersih Reksa Dana Saham

The purpose of this study is to examine the effect of inflation, BI-7 day reverses repo rate, exchange rate, the money supply, and composite stock price index on the net asset value of stock mutual funds. The population of this study is the stock mutual fund which was listed on the financial services authority in 2017-2020. The results of this study indicate that simultaneously inflation, BI-7 day reverse repo rate, exchange rate, the money supply, and composite stock price index affect the net asset value of the stock mutual fund. Partially, this study show BI-7 day reverse repo rate has a positive and significant effect on the net asset value of a stock mutual fund. The exchange rate has a positive and significant effect on the net asset value of stock mutual funds. The composite stock price index has a positive and significant effect on the net asset value of stock mutual funds. The money supply has a negative and significant effect on the net asset value of a stock mutual fund while inflation has no significant effect on the net asset value of a stock mutual fund.

MACROECONOMIC VARIABLES ANALYSIS (INFLATION AND BI 7-DAY REVERSE REPO RATE) ON SHARIA BANKING FINANCING IN INDONESIA

ABSTRACTMacroeconomic variables are numerous, including inflation and interest rates determined by the central bank. The interest rate determined by Bank Indonesia is called the BI 7-Day (Reverse) Repo Rate. Inflation and BI 7-Day (Reverse) Repo Rate in the world of sharia banking in Indonesia are two important things that are always taken into account in carrying out the function of banks as a channel of financing to the public. It can be said that sharia banking financing directly or indirectly is greatly influenced by inflation and the BI 7-Day (Reverse) Repo Rate. To calculate the effect of inflation and BI 7-Day (Reverse) Repo Rate on sharia banking financing, this study was conducted. The data used in this study are inflation data, BI 7-Day (Reverse) Repo Rate and sharia banking financing on a monthly basis from 2010-2019 (120 months). The data is then processed by the statistic method using SPSS software with the t test and F test using. The independent variables used in this research are Inflation and BI 7-Day (Reverse) Repo Rate. Hypothesis testing shows that inflation has no significant effect on Islamic banking financing in Indonesia. Meanwhile, the BI 7-Day (Reverse) Repo Rate variable has a significant effect on Islamic banking financing in Indonesia. The results of the F test show that the inflation variable and the BI 7- Day (Reserve) Repo Rate simultaneously have an influence on Islamic banking financing in Indonesia.Keywords: Infation, BI 7-Day Reverse Repo Rate, Sharia Banking Financing

A Fiscal Theory of Money and Banking

We introduce banks to the fiscal theory of price level to study the effectiveness of open market operations in correcting the distortions caused by an improper tax rate. A rise in the tax rate increases the real purchasing power of payment liquidity for short-term consumption, but reduces firms' incentive to take loans for long-term investment. An excessively low tax rate leads to an over-investment problem, which can be rectified by a combination of reverse repo operations and a positive reserve requirement. The optimal reverse repo rate is a function of the “fiscal gap”, that is, the difference between the optimal tax rate and the actual tax rate. By contrast, an excessively high tax rate leads to an under-investment problem. Open market operations are ineffective in this case as the zero lower bound of interest rates prevents the central bank from injecting additional credit to the economy.