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1–9 of 9 collapsed search results for cash rate target

RBA Glossary definition for cash rate target

cash rate target – As in most developed countries, the stance of monetary policy in Australia is expressed in terms of a target for an overnight interest rate. The rate used by the Reserve Bank of Australia is the cash rate (also known as the interbank overnight rate). When the Reserve Bank Board decides that a change in monetary policy should occur, it specifies a new target for the cash rate. A decision to ease policy is reflected in a new lower target for the cash rate, while a decision to tighten policy is reflected in a higher target.

RBA Glossary definition for Cash Rate

Cash Rate – The interest rate which banks pay to borrow funds from other banks in the money market on an overnight basis. The cash rate is the Reserve Bank of Australia's operational target for the implementation of monetary policy. It is also an important financial benchmark in the Australian financial markets. It is used as the reference rate for Australian dollar Overnight Indexed Swaps (OIS) and the ASX 30 Day Interbank Cash Rate Futures. The Reserve Bank of Australia is the administrator of the cash rate. The cash rate is calculated as the weighted average interest rate on overnight unsecured loans between banks settled in the Reserve Bank Information and Transfer System (RITS). The Cash Rate is also known by the acronym AONIA in financial markets.

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Emergency Liquidity Injections

1 Oct 2019 RDP 2019-10
Nicholas Garvin
They can allocate l between two types of liquid assets – securities ‘s’ and cash ‘c’. ... r. P. 1. >. r. P. 2. , but equal interest rates across the two policies.
https://www.rba.gov.au/publications/rdp/2019/2019-10/full.html

The Model

9 Oct 2019 RDP 2019-10
Nicholas Garvin
They can allocate l between two types of liquid assets – securities ‘s’ and cash ‘c’. ... Banks' total demand for liquidity from the securities market, in cash value, is written L.
https://www.rba.gov.au/publications/rdp/2019/2019-10/the-model.html

Appendix B: Proofs

9 Oct 2019 RDP 2019-10
Nicholas Garvin
b. >. l. s. i. m. If. b. l. S. then, in aggregate, banks have sufficient cash to meet the liquidity shock, so no securities are sold to securities buyers. (. ... Market illiquidity m continuously increases in b from zero as banks' aggregate cash shortage
https://www.rba.gov.au/publications/rdp/2019/2019-10/appendix-b.html

Appendix A: Emergency Liquidity Injection Policies in Europe and the United States

9 Oct 2019 RDP 2019-10
Nicholas Garvin
Prior to October 2008, the ECB priced the MROs and LTROs by taking bids from banks comprising interest rates and corresponding quantities, auctioning a predetermined total amount at the lowest successful ... interest rate bid; the amount auctioned was
https://www.rba.gov.au/publications/rdp/2019/2019-10/appendix-a.html

Introduction

9 Oct 2019 RDP 2019-10
Nicholas Garvin
Financial intermediaries (henceforth ‘banks’) with insufficient cash or high-quality liquid assets (HQLA) then had difficulty meeting their short-term liabilities. ... However, low interest rates on emergency lending also incentivise liquidity
https://www.rba.gov.au/publications/rdp/2019/2019-10/introduction.html

Non-technical summary for ‘Emergency Liquidity Injections’

1 Oct 2019 RDP 2019-10
Nicholas Garvin
The second insight is about whether a policymaker can disincentivise risk-taking by charging high ‘penalty’ interest rates on its emergency lending. ... I present a counterargument: penalty rates can be credible if the emergency loans are long term.
https://www.rba.gov.au/publications/rdp/2019/2019-10/non-technical-summary.html

References

9 Oct 2019 RDP 2019-10
Nicholas Garvin
Acharya VV and T Yorulmazer (2008), ‘Cash-in-the-Market Pricing and Optimal Resolution of Bank Failures’, The Review of Financial Studies, 21(6), pp 2705–2742. ... Ashcraft A, N Gârleanu and LH Pedersen (2011), ‘Two Monetary Tools: Interest
https://www.rba.gov.au/publications/rdp/2019/2019-10/references.html

Model Generalisations and Extensions

9 Oct 2019 RDP 2019-10
Nicholas Garvin
m. 1. >. m. 2. >. >. m. J. Fix b, s and the lending policy interest rate r. ... For securities with. m. j. <. m. P. , rates are penalising and banks prefer selling them over emergency borrowing.
https://www.rba.gov.au/publications/rdp/2019/2019-10/model-generalisations-and-extensions.html

Liquidity Injection through Unsecured Lending

9 Oct 2019 RDP 2019-10
Nicholas Garvin
u. – is the return on liquidity. This is what would be saved (spent) if bank i held one additional (less) unit of cash. ... i. lowers. b. i. , which raises the probability of needing to borrow from the authority and paying penalty rates.
https://www.rba.gov.au/publications/rdp/2019/2019-10/liquidity-injection-through-unsecured-lending.html