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 borrowersâ€™ 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 â€too big to failâ€ argument should remain a main concern for central banks.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 731.
Date of creation: Oct 2009
Date of revision:
Interbank markets; Spreads; Financial crisis;
Other versions of this item:
- Paolo Angelini & Andrea Nobili & Cristina Picillo, 2011. "The Interbank Market after August 2007: What Has Changed, and Why?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 923-958, 08.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-20 (All new papers)
- NEP-BAN-2010-02-20 (Banking)
- NEP-CBA-2010-02-20 (Central Banking)
- NEP-FMK-2010-02-20 (Financial Markets)
- NEP-IFN-2010-02-20 (International Finance)
- NEP-MAC-2010-02-20 (Macroeconomics)
- NEP-MON-2010-02-20 (Monetary Economics)
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- Heiko Hesse & Nathaniel Frank & Brenda GonzÃ¡lez-Hermosillo, 2008. "Transmission of Liquidity Shocks," IMF Working Papers 08/200, International Monetary Fund.
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