Interest rate dispersion and volatility in the market for daily funds

Gaspar, Ví­tor; Quirós, Gabriel Pérez; Mendizábal, Hugo Rodríguez

doi:10.1016/j.euroecorev.2007.02.004

Cited by 29 publications

(38 citation statements)

References 14 publications

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“…More specifically, we plot the distributions of the average of the transactions of each borrower/lender bank over the last two days. As already shown in Gaspar, Quiros and Mendizabal (2008), the results suggest that the cross-sectional dispersion of funding rates is wider for the transactions executed over the last two trading days compared to the transactions executed over the whole reserve maintenance period. This empirical finding holds until the collapse of Lehman Brothers.…”

Section: Calendar Effectssupporting

confidence: 59%

“…According to Gaspar, Quiros and Mendizabal (2008), at least for the Eonia panel, all the cross section dispersion in spreads is realized on the last 2 days of the reserve maintenance period. To assess this with our dataset we have repeated our nonparametric exercise consisting of estimating the unconditional kernel density estimates for both the borrowing and lending markets.…”

Section: Calendar Effectsmentioning

confidence: 99%

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Bank characteristics and the interbank money market: a distributional approach

Iori

Kapar

Olmo

2015

Studies in Nonlinear Dynamics &Amp; Econometrics

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This is the accepted version of the paper.This version of the publication may differ from the final published version. Abstract This paper studies the relationship between bank characteristics, such as size, nationality, operating currency and sovereign debt in the parent country, and the distribution of funding spreads observed in the e-MID interbank money market during the Great financial crisis. Our setup is a pseudo-panel with a random number of international banks acting in the interbank market in each period. We develop new econometric tools for panel data with random effects and discrete covariates, such as a nonparametric kernel estimator of the distribution function of the response variable conditional on a set of covariates and a consistent test of first order stochastic dominance. Our empirical results, based on these tests, shed light on the survivorship bias in the e-Mid market, and reveal the existence of a risk premium on small banks, banks with currencies different from the Euro, and banks based on countries under sovereign debt distress in the periphery of the European Union. Finally we assess the impact of policy intervention in the aftermath of the financial crisis. Permanent repository link

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Section: Calendar Effectssupporting

confidence: 59%

Section: Calendar Effectsmentioning

confidence: 99%

Bank characteristics and the interbank money market: a distributional approach

Iori

Kapar

Olmo

2015

Studies in Nonlinear Dynamics &Amp; Econometrics

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“…12 The interpretation is simple. Banks will supply funds in the market up to the point where the marginal value of an extra unit of liquidity equates its expected opportunity cost.…”

Section: The Interbank Market At T =mentioning

confidence: 99%

“…Pérez Quirós and Rodríguez Mendizábal [16] and Gaspar, Pérez Quirós and Rodríguez Mendizábal [12] showed that the standing facilities have an important role in determining the distribution of overnight rates within the reserve maintenance period. The main assumption in these papers is a neutral monetary policy defined as the liquidity the system needs to fulfill reserve requirements.…”

Section: Introductionmentioning

confidence: 99%

Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool

Quirós¹,

Mendizábal

2012

IMF Econ Rev

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“…More specifically, the literature documents how the rules defining the implementation of the monetary policy decisions contained in the frameworks make the overnight market rate particularly sensitive to the level of stress faced by market participants. In this respect, more binding reserve requirements towards the end of the maintenance period notably raise the volatility of the market for short-term funds (see, e.g., Spindt and Hoffmeister (1988), Eagle (1995), Griffiths and Winters (1995), Bartolini, Bertola and Prati (2001), and Bartolini, Bertola and Prati (2002) for the fed funds, or Hartmann, Manna and Manzanares (2001), Benito, León and Nave (2007), Gaspar, Pérez Quirós and Rodríguez Mendizábal (2008), Cassola, Durré andHolthausen (2011), andCassola, Hortacsu andKastl (2011) for the money market in the euro area). Similar forces drive the intraday operation of those markets.…”

Section: The Importance Of the Central Bank's Refinancing Operations mentioning

confidence: 99%

Nonlinear Liquidity Adjustments in the Euro Area Overnight Money Market

Beaupain

Durré

2009

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AcknowledgementsThe authors thank seminar and conference participants at the University of Cambridge, the Deutsche Bundesbank, the European Central Bank, and SKEMA for insightful comments. The authors are also grateful to e-MID for providing the data and very useful explanations on the functioning of the electronic platform. The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the European Central Bank or the Eurosystem.Renaud Beaupain IÉSEG School of Management and LEM-CNRS (U.M.R. 8179); e-mail: r.beaupain@ieseg.fr Alain DurréEuropean Central Bank, IÉSEG School of Management and LEM-CNRS (U.M.R. 8179); e-mail: alain.durre@ecb.europa.eu AbstractThe market-oriented approach promoted by the European Central Bank in the design of its refinancing operations creates incentives to credit insitutions to use actively the interbank market to manage their liquidity needs. In this context, we examine the ability of the overnight segment to guarantee the timely provision of unsecured funds to banks to smoothly absorb their liquidity shocks. This paper specifically focuses on the speed of reversion of transaction costs and available depth to their equilibrium levels in this market for overnight unsecured funds from 4 September 2000 to 31 December 2007. The reported evidence points to time-varying liquidity adjustments and identifies liquidity, market activity and the institutional setting of the ECB's refinancing operations as significant determinants of the observed resiliency regimes. Our analysis also shows how the speed of mean reversion of market liquidity, by affecting the level and the volatility of the overnight market rate, also affects the anchoring of the yield curve in the euro area.

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Interest rate dispersion and volatility in the market for daily funds

Cited by 29 publications

References 14 publications

Bank characteristics and the interbank money market: a distributional approach

Bank characteristics and the interbank money market: a distributional approach

Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool

Nonlinear Liquidity Adjustments in the Euro Area Overnight Money Market

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