Another fascinating post by Jim Koning. He has written some amazing stuff on India’s demonetisation drawn from monetary history.
In this post he points how US Army had also tried to demonetise notes in the Vietnam war. The epic serial M*A*S*H was also based on the war. Though, chances are highly remote that the war serial had anything to with India’s demonetisation. But the Vietnam war surely has parallels:
RBI researchers – Sunil Kumar, Anand Prakash and Krishna M Kushawaha – look at the factors that explain call spread (spread = call rate – policy rate):
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
The findings pretty much fit with understanding of call market players as well..
Indian central bank recently released a discussion paper on whether India should establish some new financial entities termed as Wholesale & Long-Term Finance Banks.
https://www.intelligenteconomist.com/economics-blogs/
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