The Bargaining Power in Taiwan Interbank Overnight Market

Mei-Yin Lin, Hanyu Hsu, Jue-Shyan Wang

Abstract


The rate corridor regime, relying on lending and deposit facilities to set ceilings and floors for interbank overnight rates, has been practiced by many central banks. This paper modifies the theoretical model proposed by Bech and Klee (2011) to discuss the seller’s bargaining power in Taiwan interbank overnight market under rate corridor system. We apply two-limit Tobit model to estimate the bargaining power. The empirical results show that the repo rate, policy indicator and index for reserves concentration have significantly positive relationship with seller’s bargaining power. Meanwhile, the results imply that the interbank overnight rates rise with these three variables. The conclusions could be clearly observed from the predictions on the paths of the interbank overnight rate under various scenarios.

Full Text: PDF DOI: 10.5539/ijef.v5n9p50

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This work is licensed under a Creative Commons Attribution 3.0 License.

International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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