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LIBOR: origins, economics, crisis, scandal and reform

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  • David Hou Author-Name: David Skeie

Abstract

The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable rate mortgage and student loans. LIBOR's erratic behaviour during the financial crisis fuelled market instability, simultaneously provoking questions surrounding its credibility. Ongoing regulatory investigations have uncovered misconduct by a number of financial institutions. Policymakers across the globe now face the task of reforming LIBOR in the aftermath of the scandal and crisis.

Suggested Citation

  • David Hou Author-Name: David Skeie, 2013. "LIBOR: origins, economics, crisis, scandal and reform," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    • Handle: RePEc:pal:dofeco:v:7:year:2013:doi:3910
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    References listed on IDEAS

    as
    1. François-Louis Michaud & Christian Upper, 2008. "What drives interbank rates? Evidence from the Libor panel," BIS Quarterly Review, Bank for International Settlements, March.
    2. 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.
    3. Jacob Gyntelberg & Philip Wooldridge, 2008. "Interbank rate fixings during the recent turmoil," BIS Quarterly Review, Bank for International Settlements, March.
    4. John Taylor & John Williams, 2008. "Further Results on a Black Swan in the Money Market," Discussion Papers 07-046, Stanford Institute for Economic Policy Research.
    5. Darrell Duffie & David R. Skeie & James Vickery, 2013. "A sampling-window approach to transactions-based Libor fixing," Staff Reports 596, Federal Reserve Bank of New York.
    6. Vincent Brousseau & Alexandre Chailloux & Alain Durré, 2009. "Interbank Offered Rate: Effects of the financial crisis on the information content of the fixing," Working Papers 2009-ECO-10, IESEG School of Management.
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    More about this item

    Keywords

    LIBOR; financial crisis; scandal; interbank; banking; reference rate; interest rate;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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