Repo market, its dynamic relationships to other financial markets and its role as economic indicators: The case of Thailand.
Item
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Title
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Repo market, its dynamic relationships to other financial markets and its role as economic indicators: The case of Thailand.
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Identifier
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AAI9917699
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identifier
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9917699
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Creator
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Skolpadungket, Prisadarng.
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Contributor
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Adviser: Salih N. Neftci
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Date
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1999
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, Finance
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Abstract
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Repos are essentially secured loans. Securities are put as collateral by contracts of sale attached with repurchased agreements. Repo markets provide low cost of funds for financial institutions in taking investment positions on government securities, and for security lending. Central banks use Repo markets for their Open Market Operation (OMO) mostly for the short-run purposes. However, the Bank of Thailand heavily relies on Thai Repo market for its OMO because there is virtually no secondary market for government securities. By using Vector Autoregressive Methodology (VAR) to investigate dynamic relationship among Thai domestic financial markets, this study found that there are unidirectional influences from Thai interbank market and the Repo market to Thai stock market but not to Thai baht/U.S. dollar exchange rate. For dynamic linkage among major international money markets namely, U.S. federal fund market; London Euro-dollar market (LIBOR); Singapore Asian dollar market (SIBOR) and the both of Thai money markets, this study found that there are unidirectional transmissions from the outside to domestic markets including the foreign exchange market. Studies of economic indicators found that interest rates and their yield curves contain some information about future real and monetary variables. For the case of Thailand, this study found that Repo rates and interbank rate in overall can be a good economic indicators. Spread between 30-day Repo rate and 1-day Repo rate as a proxy for the shape of yield curve is found to Granger cause growth in narrow money (MI), growth in board money (M2), return on the stock market index and the change in prime rate. While 30-day Repo rate exhibits Granger cause the prime rate and the stock index. By using Repo rates to forecast future inflation rates, the model that uses the spread of Repo rates performs best but fails to capture seasonality and has a wrong sign. The model that based on theoretical relation of inflation, nominal interest rate and real interest rate with rational expectation assumptions performs slightly better that based on univariate time series (Autoregressive Moving Average-ARMA) of inflation rate.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
