CHARACTERIZATION OF THE DETERMINATION MODE
OF THE ALGERIAN INTERBANK MARKET RATE Cover Image

CARACTERISATION DU MODE DE DETERMINATION DU TAUX DE MARCHE INTERBANCAIRE ALGERIEN
CHARACTERIZATION OF THE DETERMINATION MODE OF THE ALGERIAN INTERBANK MARKET RATE

Author(s): Afroune Nadia, Achouche Mohamed
Subject(s): Economy
Published by: Editura Bibliotheca
Keywords: The interbank market; the overnight rate; cointegration; normal law; Algeria.

Summary/Abstract: This article applies to characterize the mode of determination of interbankmarket rates and verify whether, with Algeria's transition to a market economy, the interestrate of the Algerian interbank market, in particular the overnight rate, is really determined bythe market mechanism, i.e., by the law of supply and demand. To do this, first of all, thestructure of the interbank market in Algeria has been extensively studied. It was found that theAlgerian interbank market, despite its extension to institutional investors and non-bankfinancial institutions, remains small and not very dynamic and is still in an embryonic state.Second, empirically, we have mobilized a key econometric concept, cointegration, toempirically test the relationship between the overnight rate and fundamentals. The VECMmodel indicates that the overnight rate is not absolutely determined by fundamentals, i.e. bymarket mechanisms, but there are other forces that influence its determination. To confirmthis result, our analysis is completed by exploring the stochastic behavior of the short-terminterest rate. This analysis is based on a hypothetical proposition that rates in a competitivemarket should follow a normal distribution. The results of the estimates show that thedistribution of interest rates in the Algerian interbank market strictly deviates from the normallaw and that there are extreme behaviours of the interest rate which reflect. monopoly andimperfection situations in the market.

  • Issue Year: 2021
  • Issue No: 3 (52)
  • Page Range: 144-176
  • Page Count: 34
  • Language: French
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