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Overnight interbank markets and the determination of the interbank rate: A selective survey

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  • Green, Christopher
  • Bai, Ye
  • Murinde, Victor
  • Ngoka, Kethi
  • Maana, Isaya
  • Tiriongo, Samuel

Abstract

Overnight interbank markets provide critical facilities for the banking system to manage, pool and redistribute its cash reserves. We provide a selective survey of the literature on overnight interbank markets. We outline the typical structure of overnight markets, including the networking relationships involved, as an indispensable prerequisite for a clear understanding of the workings of these markets. We review the theoretical and empirical studies on the determination of the overnight rate, and in that context discuss the implications of the 2007–08 financial crisis. We summarise key issues for further research.

Suggested Citation

  • Green, Christopher & Bai, Ye & Murinde, Victor & Ngoka, Kethi & Maana, Isaya & Tiriongo, Samuel, 2016. "Overnight interbank markets and the determination of the interbank rate: A selective survey," International Review of Financial Analysis, Elsevier, vol. 44(C), pages 149-161.
  • Handle: RePEc:eee:finana:v:44:y:2016:i:c:p:149-161
    DOI: 10.1016/j.irfa.2016.01.014
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    Keywords

    Interbank market; Overnight rate; Bank reserves; Bank liquidity;

    JEL classification:

    • 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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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