Advanced Search
MyIDEAS: Login

The Impact of Liquidity Regulation on Interbank Money Markets

Contents:

Author Info

  • Bonner, Clemens
  • Eijffinger, Sylvester C W

Abstract

This paper analyzes the impact of a liquidity requirement similar to the Basel III Liquidity Coverage Ratio (LCR) on the interbank money market and monetary policy implementation. By combining two unique datasets of Dutch banks from 2004 to 2011, we show that non-compliance with a liquidity requirement causes banks to pay and charge higher interest rates for loans with maturities longer than the requirement’s 30 day horizon. With respect to volumes, our analysis reveals that banks with a liquidity deficiency increase borrowing and decrease lending of long-term loans. Short-term loans seem to be unaffected by a liquidity requirement. A key takeaway from our analysis is that as long as only a small share of banks is non-compliant with the liquidity requirement, monetary policy implementation is likely to be unaffected. As soon as there is an aggregate shortage, central banks should consider using the interbank term rate as (additional) target for monetary policy implementation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP9124.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9124.

as in new window
Length:
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:cpr:ceprdp:9124

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: Basel 3; Interbank Market; liquidity; monetary policy;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Morten L. Bech & Todd Keister, 2013. "Liquidity regulation and the implementation of monetary policy," BIS Working Papers 432, Bank for International Settlements.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9124. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.