Journal Name:
- İstanbul Üniversitesi İşletme Fakültesi Dergisi
Author Name | University of Author | Faculty of Author |
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Abstract (Original Language):
The impact of economy wide liquidity shortages on the stock markets
is a well documented economic phenomenon. I t is intuitive to t h i n k that
this impact is further augmented i n t h i n equity markets. İSE can safely
be considered such a t h i n market and therefore i t is claimed that l i q u i d i -
t y shortages i n the economy causes frequent fluctuations i n the stock
market.
The overnight interbank interest rates i n Turkish financial markets
represent the interest on the shortest maturity claims and considered to
be a sound measure of the short swings i n the liquidity need of the economy.
Although overnight interbank rates are to some extent affected by
the longer term interest rates, they more accurately reflect the short
term flactuations of the îiquidity need i n the economy. Instances such as
corporate tax payments, replenishment of the disponibility reserves of
the majör banks create sharp fluctuations in the interbank rates which
are independent of the longer term interest rates.
Also i t was considered to be an indictor of then (during the study period)
iliegel repurchase (repo) market rates. Although regulations i n the financial markets (Decree by Law 35, Article 29) prohibited repurchase
agreements between fmancial mstitutions and fınancial institutions and
t h i r d parties, there was a very active repurcahse market for the short
term treasury bills and other government bonds. I t is claimed that almost
60% of the transactions involving government issued securities are
repurchase agreements (Altay, Beyazitoglu and Ersel, 1988). Repos can
be used as profîtable substitutes for the time deposits since repos do not
require any reserve posting i n the Central Bank. This reduces the cost of
the short term funds for the banks and practically leads to higher short
term interst rates than the time deposits. Since corporations can derive
higher interest rates on their short t e rm investments, they prefer repos
över time deposits. Although there is no documentation, i t is claimed that
the average maturity i n the repo market ranges from 2-3 days to six
weeks. The most active partcipants of the repo market are commercial
banks and brokerage firms who hold large inventories of t-bills and government
bonds since their returns are tax exempt. On the other hand ali
the corporations, who desire to obtain higher returns on their excess cash
than the time deposits, constitute the demand side.
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