Market-specific and currency-specific risk during the global financial crisis: Evidence from the interbank markets in Tokyo and London
AbstractThis paper investigates how international money markets reflected credit and liquidity risk during the global financial crisis. After matching the currency denomination, we examine how the Tokyo Interbank Offered Rate (TIBOR) was synchronized with the London Interbank Offered Rate (LIBOR). We find remarkably asymmetric responses in market-specific and currency-specific risk during the crisis. The regression results suggest that market-specific credit risk increased the difference across markets, whereas liquidity risk caused the difference across currency denominations. They also support the view that liquidity shortage of the US dollar occurred in international money markets during the crisis. Coordinated central bank liquidity provisions were useful in reducing the liquidity shortage of the US dollar, but their effectiveness was asymmetric across markets.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 36 (2012)
Issue (Month): 12 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf
Credit risk; Liquidity risk; Interbank market; Global financial crisis;
Find related papers by JEL classification:
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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