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A Study of Market Microstructure of Indian Money Market

Vol 7 , Issue 2 , July - December 2020 | Pages: 31-54 | Research Paper  

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Author Details ( * ) denotes Corresponding author

1. * K. V. Bhanumurthy, Professor, USME, Delhi Technological University, Delhi, India (
2. Sonia Goel, Associate Professor, Economics, Ramjas College, Delhi, India (

The paper examines the market microstructure - A descriptive study of the nature and structure of the Indian money market. For the empirical analysis we have studied each of the four sub-markets of the money market (Commercial Paper(CP), Certificate of Deposit(CD), Call rate(CMM)and T-Bills). Our paper looks at the qualitative aspects, the granular view of the Indian money market. It studies the overall trends, growth rates and index of interest rates of the four submarkets of the Indian money market. The paper clearly shows that the short-term interest rate follows almost the same pattern; breaks occur in a similar fashion. We attribute this decline to change in market microstructure which is a consequence to the liberalization of the money market. The growth analysis is done with the help of semi-log equations, structural breaks to study the overall growth rates for different markets. It is evident from the paper that on the whole, there has been a declining trend in the money market rates, with some differences between sub-periods. The overall and period-wise trends and growth rates also exhibit similar patterns amongst the four short-term interest rates, where all rates are falling.


Money market; Market micro structure; Short-term interest rate; T-bills, Call money; Commercial paper; Certificate of deposits.

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