How to measure the unsecured money market? The Eurosystem's implementation and validation using TARGET2 data
AbstractThis paper develops a methodology, based on Furfine (1999), to identify unsecured interbank money market loans from transaction data of the most important euro processing payment system, TARGET2, for maturity ranging from one day (overnight) up to three months. The implementation has been verified with (i) interbank money market transactions executed on the Italian trading platform e-MID and (ii) aggregated reporting by the EONIA panel banks. The Type 2 (false negative) error for the best performing algorithm setup is equal to 0.92%. The results focus on three levels: Eurosystem, core versus (geographical) periphery and countries (Italy and the Netherlands). The different stages of the global financial crisis and of the sovereign debt crises are clearly visible in the interbank money market, characterised by significant drops in the turnover. We find aggregated interest rates very close to the EONIA but we observe high heterogeneity across countries and market participants.
Download InfoIf 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.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 369.
Date of creation: Jan 2013
Date of revision:
euro interbank money market; Furfine; TARGET2; financial stability; EONIA;
Other versions of this item:
- Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2014. "How to measure the unsecured money market? The Eurosystem’s implementation and validation using TARGET2 data," Questioni di Economia e Finanza (Occasional Papers) 215, Bank of Italy, Economic Research and International Relations Area.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-26 (All new papers)
- NEP-BAN-2013-01-26 (Banking)
- NEP-EEC-2013-01-26 (European Economics)
- NEP-MAC-2013-01-26 (Macroeconomics)
- NEP-MON-2013-01-26 (Monetary Economics)
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.:
- Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2009.
"Liquidity hoarding and interbank market spreads: the role of counterparty risk,"
Working Paper Series
1126, European Central Bank.
- Marie Hoerova & Cornelia Holthausen & Florian Heider, 2009. "Liquidity hoarding and interbank market spreads: the role of counterparty risk," 2009 Meeting Papers 929, Society for Economic Dynamics.
- Heider, Florian & Hoerova, Marie & Holthausen, Cornelia, 2010. "Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk," CEPR Discussion Papers 7762, C.E.P.R. Discussion Papers.
- Heider, F. & Hoerova, M. & Holthausen, C., 2009. "Liquidity Hoarding and Interbank Market Spreads: The Role of Counterparty Risk," Discussion Paper 2009-40 S, Tilburg University, Center for Economic Research.
- Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
- Giuseppe Cappelletti & Antonio De Socio & Giovanni Guazzarotti & Enrico Mallucci, 2011. "The impact of the financial crisis on inter-bank funding: evidence from Italian balance sheet data," Questioni di Economia e Finanza (Occasional Papers) 95, Bank of Italy, Economic Research and International Relations Area.
- Q. Farooq Akram & Casper Christophersen, 2010. "Interbank overnight interest rates - gains from systemic importance," Working Paper 2010/11, Norges Bank.
- Andrea Monticini & Francesco Ravazzolo, 2011.
"Forecasting the intraday market price of money,"
2011/06, Norges Bank.
- Andrea Monticini & Francesco Ravazzolo, 2014. "Forecasting the intraday market price of money," DISCE - Working Papers del Dipartimento di Economia e Finanza def10, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
- Scott Hendry & Nadja Kamhi, 2007. "Uncollateralized Overnight Loans Settled in LVTS," Working Papers 07-11, Bank of Canada.
- Selva Demiralp & Brian Preslopsky & William Whitesell, 2004.
"Overnight interbank loan markets,"
Finance and Economics Discussion Series
2004-29, Board of Governors of the Federal Reserve System (U.S.).
- Fariba Karimi & Matthias Raddant, 2013.
"Cascades in real interbank markets,"
Kiel Working Papers
1872, Kiel Institute for the World Economy.
- Matthias Raddant, 2012.
"Structure in the Italian Overnight Loan Market,"
Kiel Working Papers
1772, Kiel Institute for the World Economy.
- Ronald Heijmans & Richard Heuver & Clement Levallois & Iman van Lelyveld, 2014. "Dynamic visualization of large transaction networks: the daily Dutch overnight money market," DNB Working Papers 418, Netherlands Central Bank, Research Department.
- Ronald Heijmans & Lola Hern�ndez & Richard Heuver, 2013. "Determinants of the rate of the Dutch unsecured overnight money market," DNB Working Papers 374, Netherlands Central Bank, Research Department.
- Tölö , Eero & Jokivuolle, Esa & Viren, Matti, 2014. "Do private signals of a bank’s creditworthiness predict the bank’s CDS price? Evidence from the Eurosystem's overnight loan rates," Research Discussion Papers 9/2014, Bank of Finland.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If references are entirely missing, you can add them using this form.