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Multiple equilibrium overnight rates in a dynamic interbank market game

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  • Tapking, Jens

Abstract

We analyse a two period model of the interbank market, i.e. the market at which banks trade liquidity. We assume that banks do not take the inter- bank interest rate as given, but multilaterally negotiate on interest rates and transaction volumes. The solution concept applied is the Shapley value. We show that there is a multiplicity of average equilibrium interest rates of the first period so that the average interest rate in this period does not convey any information on the expected liquidity situation at the interbank market. -- Wir analysieren ein Zwei-Perioden-Modell des Interbankenmarktes, d. h. des Marktes an dem Banken untereinander Liquidität handeln. Wir nehmen an, dass die Banken den Zinssatz am Interbankenmarkt nicht als exogen betrachten, sondern Zinssätze und Transaktionsvolumen in multilateralen Verhandlungen festlegen. Als Gleichgewichtskonzept dient der Shapley-Wert. Wir zeigen, dass der durchschnittliche Zinssatz der ersten Periode im Gleichgewicht nicht eindeutig ist und daher keine Informationen über die erwartete Liquiditätssituation am Interbankenmarkt enthält.

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2003,04.

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Date of creation: 2003
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Handle: RePEc:zbw:bubdp1:4199

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  1. David Pérez-Castrillo & David Wettstein, . "Bidding For The Surplus: A Non-Cooperative Approach To The Shapley Value," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 461.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. repec:fth:bfdipa:8/2001 is not listed on IDEAS
  3. Gabriel Pérez Quirós & Hugo Rodríguez, 2000. "The daily market for funds in Europe: Has something changed with the EMU?," Economics Working Papers 474, Department of Economics and Business, Universitat Pompeu Fabra.
  4. Välimäki, Tuomas, 2001. "Fixed rate tenders and the overnight money market equilibrium," Research Discussion Papers, Bank of Finland 8/2001, Bank of Finland.
  5. Sergiu Hart & Andreu Mas-Colell, 1994. "Bargaining and value," Economics Working Papers 114, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 1995.
  6. Butnariu, Dan & Klement, Erich Peter, 1996. "Core, Value and Equilibria for Market Games: On a Problem of Aumann and Shapley," International Journal of Game Theory, Springer, Springer, vol. 25(2), pages 149-60.
  7. Hartmann, Philipp & Manna, Michele & Manzanares, Andrés, 2001. "The microstructure of the euro money market," Working Paper Series, European Central Bank 0080, European Central Bank.
  8. Furfine, Craig H, 2001. "Banks as Monitors of Other Banks: Evidence from the Overnight Federal Funds Market," The Journal of Business, University of Chicago Press, vol. 74(1), pages 33-57, January.
  9. Tapking, Jens, 2002. "The Eurosystem's Standing Facilities in a General Equilibrium Model of the European Interbank Market," Discussion Paper Series 1: Economic Studies 2002,20, Deutsche Bundesbank, Research Centre.
  10. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 451, Bank of Italy, Economic Research and International Relations Area.
  11. Ho, Thomas S Y & Saunders, Anthony, 1985. " A Micro Model of the Federal Funds Market," Journal of Finance, American Finance Association, American Finance Association, vol. 40(3), pages 977-88, July.
  12. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, Econometric Society, vol. 57(1), pages 81-95, January.
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Cited by:
  1. Schanz, Jochen, 2009. "How do different models of foreign exchange settlement influence the risks and benefits of global liquidity management?," Bank of England working papers 374, Bank of England.

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