University of Tabriz
Islamic World Science Citation Center (ISC)
Raei, R., KOMIJANI, A., Baky Haskuee, M., Jafari, H. (2020). Simulating interbank money market interest rate using search models within a Nash-Equilibrium framework. , 7(3), 25-50. doi: 10.22034/ecoj.2020.11653
Reza Raei; AKBAR KOMIJANI; Mortaza Baky Haskuee; Hamidreza Jafari. "Simulating interbank money market interest rate using search models within a Nash-Equilibrium framework". , 7, 3, 2020, 25-50. doi: 10.22034/ecoj.2020.11653
Raei, R., KOMIJANI, A., Baky Haskuee, M., Jafari, H. (2020). 'Simulating interbank money market interest rate using search models within a Nash-Equilibrium framework', , 7(3), pp. 25-50. doi: 10.22034/ecoj.2020.11653
Raei, R., KOMIJANI, A., Baky Haskuee, M., Jafari, H. Simulating interbank money market interest rate using search models within a Nash-Equilibrium framework. , 2020; 7(3): 25-50. doi: 10.22034/ecoj.2020.11653

Simulating interbank money market interest rate using search models within a Nash-Equilibrium framework

نظریه های کاربردی اقتصاد
Article 2, Volume 7, Issue 3 - Serial Number 26, December 2020, Pages 25-50    PDF (556.56 K)
Document Type: Research Paper
DOI: 10.22034/ecoj.2020.11653
Authors
Reza Raei1; AKBAR KOMIJANI2; Mortaza Baky Haskuee3; Hamidreza Jafari* 4
1Faculty of Management - University of Tehran
2Faculty of Economics- University if Tehran
3Faculty of Economics-Imam Sadeq University
4Ph.d student in Finance
Abstract
The interbank market is a part of the money market in which banks and credit institutions enter into transactions to finance and consume surplus resources in the short term with the aim of balancing their liquidity situation.
In a corridor framework of monetary policy, the central bank sets interbank money market (IBMM) interest rate and also implements open market operation (OMO) to direct market interest rate towards the policy rate. Hence estimation of IBMM equilibrium interest rate is the most important challenge in monetary policy making. In order to model the interbank market in Iran, this research provides a 4-periods search model, including shocks, searching for counterparty, bargaining and settlement with central bank, and it simulates Iranian banks’ behavior to derive Iran’s interbank rate from 2017 to 2019.
The results show that the model-driven lending rate of large banks is higher than their borrowing rate which is consistent with rational behavior of the banks, while the actual rates are the same in both cases that implies distortion in interest rate policy making by Iran central bank.
Keywords
Interbank Money Market; Nash Equilibrium; Search Models; Network Models; Interest rate Corridor
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