CBLO and its Association with Repo Market: A Study of Indian Money Market

Abstract

Money market plays a crucial role in the growth and development of financial system in a economy. Money market provides a platform for maintaining equilibrium between surplus fund and fund borrower for short-term ranging overnight up to a year. Repo market and Collateralized Borrowing and Lending Obligations (CBLO) segment plays anchor role in marinating liquidity in the financial system. In this paper an effort has been made analyze the association between both the short term money market instrument, CBLO and repo. For the analysis, weekly data of trading volume of both the variables ranging from April 2012 to March 2014 is used. Repo rate and database of CBLO is collected from the web portals of Reserve Bank of India (RBI) and CCIL. For the analysis, unit root test followed by co-integration is used to examine the relationship between repo market and CBLO. The Vector Auto Regressive (VAR) model is used investigate the dynamic inter relationship between repo and monetary CBLO.

Keywords: CBLO, Repo Market, VAR, Money Market

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