The Interbank Market after August 2007: What Has Changed, and Why?
AbstractThe outbreak of the financial crisis coincided with a sharp increase of worldwide interbank interest rates. We analyze the micro and macroeconomic determinants of this phenomenon, finding that before August 2007 interbank rates were insensitive to borrower characteristics, whereas afterwards they became reactive to borrowersÃ¢â¬â¢ creditworthiness. At the same time, conditions for large borrowers became relatively more favorable, both before and after the failure of Lehman Brothers. This suggests that banks have become more discerning in their lending, a welcome change, but that moral hazard considerations related to the Ã¢â¬too big to failÃ¢â¬ argument should remain a main concern for central banks.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 43 (2011)
Issue (Month): 5 (08)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Paolo Angelini & Andrea Nobili & Maria Cristina Picillo, 2009. "The interbank market after August 2007: what has changed, and why?," Temi di discussione (Economic working papers) 731, Bank of Italy, Economic Research and International Relations Area.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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- Heiko Hesse & Nathaniel Frank & Brenda GonzÃ¡lez-Hermosillo, 2008. "Transmission of Liquidity Shocks: Evidence from the 2007 Subprime Crisis," IMF Working Papers 08/200, International Monetary Fund.
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