Central bank balance sheet, liquidity and autonomous factors

Abstract

For monetary policy implementation purposes, it is important to forecast demand of liquidity in the market in order to ensure market equilibrium that is close to the monetary policy target by injecting or withdrawing liquidity from the market. One of the main reasons of changes in liquidity conditions is autonomous factors, which are reflected in central bank balance sheet. There are interconnections between the changes in these factors, the exploration of which can enhance the effectiveness of liquidity demand forecasts.