IDEAS home Printed from https://ideas.repec.org/a/eee/inecon/v87y2012i1p162-177.html
   My bibliography  Save this article

Market response to policy initiatives during the global financial crisis

Author

Listed:
  • Aït-Sahalia, Yacine
  • Andritzky, Jochen
  • Jobst, Andreas
  • Nowak, Sylwia
  • Tamirisa, Natalia

Abstract

This paper examines the impact of macroeconomic and financial sector policy announcements in the United States, the United Kingdom, the euro area, and Japan on interbank credit and liquidity risk premia during the recent crisis. Overall, policy interventions were associated with a reduction in interbank risk premia, most significantly for recapitalization programs. By contrast, decisions to bail out individual banks in an ad hoc manner or let them fail were accompanied by a significant rise in interbank risk premia. Most policy announcements had international spillovers. These results are broadly robust to using alternative measures of financial distress and varying the size of the event window.

Suggested Citation

  • Aït-Sahalia, Yacine & Andritzky, Jochen & Jobst, Andreas & Nowak, Sylwia & Tamirisa, Natalia, 2012. "Market response to policy initiatives during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 162-177.
    • Handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:162-177
    DOI: 10.1016/j.jinteco.2011.12.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0022199611001504
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jinteco.2011.12.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Geršl, Adam & Lešanovská, Jitka, 2014. "Explaining the Czech interbank market risk premium," Economic Systems, Elsevier, vol. 38(4), pages 536-551.
    2. Michiel Bijlsma & Wouter Elsenburg & Michiel van Leuvensteijn, 2010. "Four Futures for Finance; A scenario study," CPB Document 211.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Acharya, Viral V. & Skeie, David, 2011. "A model of liquidity hoarding and term premia in inter-bank markets," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 436-447.
    4. S. Gabrieli & C.-P. Georg, 2014. "A network view on interbank market freezes," Working papers 531, Banque de France.
    5. Aït-Sahalia, Yacine & Andritzky, Jochen & Jobst, Andreas & Nowak, Sylwia & Tamirisa, Natalia, 2012. "Market response to policy initiatives during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 162-177.
    6. Flannery, Mark J. & Kwan, Simon H. & Nimalendran, Mahendrarajah, 2013. "The 2007–2009 financial crisis and bank opaqueness," Journal of Financial Intermediation, Elsevier, vol. 22(1), pages 55-84.
    7. Gagnon, Marie-Hélène & Gimet, Céline, 2013. "The impacts of standard monetary and budgetary policies on liquidity and financial markets: International evidence from the credit freeze crisis," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4599-4614.
    8. Sudipto Bhattacharya & Georgy Chabakauri & Kjell G. Nyborg, 2012. "Securitized Banking, Asymmetric Information, and Financial Crisis: Regulating Systemic Risk Away," FMG Discussion Papers dp704, Financial Markets Group.
    9. Nyborg, Kjell G., 2017. "Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 198-214.
    10. Xavier Vives, 2014. "On The Possibility Of Informationally Efficient Markets," Journal of the European Economic Association, European Economic Association, vol. 12(5), pages 1200-1239, October.
    11. Reichlin, Lucrezia, 2014. "Monetary Policy and Banks in the Euro Area: The Tale of Two Crises," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 387-400.
    12. Monticini, Andrea & Ravazzolo, Francesco, 2014. "Forecasting the intraday market price of money," Journal of Empirical Finance, Elsevier, vol. 29(C), pages 304-315.
    13. Fecht, Falko & Eder, Armin & Pausch, Thilo, 2013. "Banks, Markets, and Financial Stability," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79712, Verein für Socialpolitik / German Economic Association.
    14. Liberati, Caterina & Marzo, Massimiliano & Zagaglia, Paolo & Zappa, Paola, 2012. "Structural distortions in the Euro interbank market: the role of 'key players' during the recent market turmoil," MPRA Paper 40223, University Library of Munich, Germany.
    15. Stacchini, Massimiliano & Degasperi, Petra, 2015. "Trust, family businesses and financial intermediation," Journal of Corporate Finance, Elsevier, vol. 33(C), pages 293-316.
    16. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2016. "How to Measure the Unsecured Money Market: The Eurosystem’s Implementation and Validation Using TARGET2 Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 247-280, March.
    17. Guembel, Alexander & Sussman, Oren, 2010. "Liquidity, Contagion and Financial Crisis," IDEI Working Papers 664, Institut d'Économie Industrielle (IDEI), Toulouse.
    18. Nyborg, Kjell G., 2017. "Reprint of: Central bank collateral frameworks," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 232-248.
    19. Morrison, Alan D. & White, Lucy, 2013. "Reputational contagion and optimal regulatory forbearance," Journal of Financial Economics, Elsevier, vol. 110(3), pages 642-658.
    20. Mr. Philippe D Karam & Ouarda Merrouche & Moez Souissi & Rima Turk, 2014. "The Transmission of Liquidity Shocks: The Role of Internal Capital Markets and Bank Funding Strategies," IMF Working Papers 2014/207, International Monetary Fund.

    More about this item

    Keywords

    Crisis; Announcements; Interbank; Financial; Policy; Event;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:162-177. 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: . General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505552 .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.