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The impact of the global financial crisis on the cross-currency linkage of LIBOR-OIS spreads

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  • Ji, Philip Inyeob
  • In, Francis
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    Abstract

    This article examines the impact of global financial crisis on cross-currency linkage of the LIBOR-OIS spread, a financial stress measure in interbank markets. The impulse response analysis is conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. The overall evidence suggests that the crisis has substantially changed the nature of the cross-currency interactions in liquidity stress. Also global money markets have failed to contain stress in US dollar funding and the role of the Japanese yen as a liquidity source appears to be significant, while these two currencies drive the cross-currency system of liquidity stress.

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    File URL: http://www.sciencedirect.com/science/article/B6VGT-50W80VJ-1/2/e91daf83e452495b395c619a545a0527
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 20 (2010)
    Issue (Month): 5 (December)
    Pages: 575-589

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    Handle: RePEc:eee:intfin:v:20:y:2010:i:5:p:575-589

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    Web page: http://www.elsevier.com/locate/intfin

    Related research

    Keywords: Global financial crisis LIBOR-OIS spreads Vector autoregressive model Cointegration Vector error correction;

    References

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    1. von Thadden, Ernst-Ludwig, 1999. "Liquidity creation through banks and markets: Multiple insurance and limited market access," European Economic Review, Elsevier, vol. 43(4-6), pages 991-1006, April.
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    Citations

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    Cited by:
    1. Asongu Simplice, 2011. "The 2011 Japanese earthquake, tsunami and nuclear crisis: evidence of contagion from international financial markets," Working Papers 11/006, African Governance and Development Institute..
    2. Simplice A. ASONGU, 2012. "Globalization, Financial Crisis And Contagion: Time - Dynamic Evidence From Financial Markets Of Developing Countries," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 0(2), pages 131-139, January.
    3. Olson, Eric & Miller, Scott & Wohar, Mark E., 2012. "“Black Swans” before the “Black Swan” evidence from international LIBOR–OIS spreads," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1339-1357.
    4. Simplice Anutechia ASONGU, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Chapters of Financial Aspects of Recent Trends in the Global Economy book, in: Rajmund Mirdala (ed.), Financial Aspects of Recent Trends in the Global Economy, volume 1, chapter 1, pages 12-32 ASERS Publishing.
    5. Guidi, Francesco & Ugur, Mehmet, 2012. "Are South East Europe stock markets integrated with regional and global stock markets?," MPRA Paper 44133, University Library of Munich, Germany, revised Dec 2012.
    6. Tamakoshi, Go & Hamori, Shigeyuki, 2014. "On cross-currency transmissions between US dollar and euro LIBOR-OIS spreads," Research in International Business and Finance, Elsevier, vol. 30(C), pages 83-90.

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