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The intraday interest rate under a liquidity crisis: the case of August 2007

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Author Info
Angelo Baglioni () (DISCE, Università Cattolica)
Andrea Monticini () (DISCE, Università Cattolica)

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Abstract

By analyzing high frequency data for the European interbank market, we show that the intraday interest rate (implicitly defined by the term structure of the ON rate) jumped by more than ten times at the outset of the financial turmoil in August 2007, resulting in an inefficiency of the money market. This took place despite the provision of unlimited free daylight overdrafts by the ECB, on a collateralized basis. We suggest that such result may be attributed to an increase of the liquidity premium and of the cost of collateral.

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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0083.pdf
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File Function: First version, 2008
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Publisher Info
Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0083.

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Length: nn pages 16
Date of creation: Sep 2008
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Handle: RePEc:ctc:serie3:ief0083

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Web page: http://www.unicatt.it/Istituti/EconomiaFinanza
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Related research
Keywords: intraday interest rate; liquidity crisis; money market; central banking;

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G3 - Financial Economics - - Corporate Finance and Governance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Luca Colombo & Herbert Dawid & Kordian Kabus, 2007. "When do Thick Venture Capital Markets Foster Innovation? An Evolutionary Analysis," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0074, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  2. Rizzo, Leonzio, 2000. "Equalisation and Fiscal Competition," MPRA Paper 5335, University Library of Munich, Germany. [Downloadable!]
  3. Bordignon, Massimo & Colombo, Luca & Galmarini, Umberto, 2003. "Fiscal Federalism and Endogenous Lobbies' Formation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  4. Luca Colombo & Michele Grillo, 2006. "Collusion when the Number of Firms is Large," Quaderni dell'Istituto di Economia e Finanza 66, Università Cattolica del Sacro Cuore - Istituto di Economia e Finanza. [Downloadable!]
  5. Angelo BAGLIONI, 2002. "Multiple Banking Relationships: Competition among "inside" Banks," Rivista Italiana degli Economisti, SIE - Societa' Italiana degli Economisti (I), vol. 2(1), pages 165-196, August. [Downloadable!] (restricted)
  6. Andrea Terzi & Giovanni Verga, 2006. "Stock-bond correlation and the bond quality ratio: Removing the discount factor to generate a “deflated” stock index," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0067, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  7. Mattesini Fabrizio & Rossi Lorenza, 2007. "Productivity shocks and optimal monetary policy in a unionized labor market economy," wp.comunite 0023, Department of Communication, University of Teramo. [Downloadable!]
    Other versions:
  8. Gerd Weinrich & Luca Colombo, 2001. "The Phillips Curve as a Long-Run Phenomenon in a Macroeconomic Model with Complex Dynamics," CeNDEF Workshop Papers, January 2001 1B.3, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    Other versions:
  9. Angelo Baglioni & Andrea Monticini, 2005. "The intraday price of money: evidence from the e-MID market," Finance 0507020, EconWPA. [Downloadable!]
  10. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2002. "In Search for Yardstick Competition: Property Tax Rates and Electoral Behavior in Italian Cities," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  11. Andrea Monticini & Giacomo Vaciago, 2007. "Are Euro Interest Rates led by FED Announcements?," Money Macro and Finance (MMF) Research Group Conference 2006 16, Money Macro and Finance Research Group. [Downloadable!]
  12. Massimo Bordignon, 2000. "Problems of Soft Budget Constraints in Intergovernmental Relationships: The Case of Italy," RES Working Papers 3099, Inter-American Development Bank, Research Department. [Downloadable!]
  13. Lorenzo Cappellari & Gilberto Turati, 2004. "Volunteer Labour Supply: the role of workers' motivations," Annals of Public and Cooperative Economics, Blackwell Publishing, vol. 75(4), pages 619-643, December. [Downloadable!] (restricted)
  14. Luca Colombo & Gianluca Femminis, 2007. "The Social Value of Public Information with Costly Information Acquisition," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0073, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
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  15. Andrea Terzi, 2005. "International Financial Instability in a World of Currencies Hierarchy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0064, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  16. Luca Colombo & Gilberto Turati, 2007. "The Role of the Local Business Environment in Banking Consolidation," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0076, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
  17. Angelo Baglioni, 2007. "Corporate Governance as a Commitmente and Signalling Device," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0075, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maria Flavia Ambrosanio & Massimo Bordignon & Floriana Cerniglia, 2008. "Constitutional reforms, fiscal decentralization and regional fiscal flows in Italy," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0084, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE). [Downloadable!]
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