Sunil Kumar Anand Prakash and Krishna M. Kushawah The Working Paper titled “What Explains Call Money Rate Spread in India?” is published under the Reserve Bank of India Working Paper Series on April 10, 2017. The paper is co-authored by Sunil Kumar, Anand Prakash and Krishna M. Kushawaha. The study focuses on various drivers of overnight inter-bank rate spread under the new liquidity management framework during July 2013 to December 2016. Applying OLS with Newey-West estimator and various GARCH models to daily data, the study finds that liquidity conditions viz., deficit, distribution and uncertainty impact the call money rate spread adversely. A moderation in the impact of liquidity uncertainty has, however, been noticed after the introduction of fine-tuning liquidity management operations in September 2014. Other factors, viz., the quarter-end phenomenon and structural changes in the liquidity management framework have also been found impacting the call money rate spread. |