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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. Fran├žois-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. 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.
    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.
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    Citations

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    Cited by:

    1. Mikhail V. Oet & John M. Dooley & Stephen J. Ong, 2015. "The Financial Stress Index: Identification of Systemic Risk Conditions," Risks, MDPI, Open Access Journal, vol. 3(3), pages 1-25, September.
    2. Kleinow, Jacob & Moreira, Fernando, 2016. "Systemic risk among European banks: A copula approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 42(C), pages 27-42.
    3. Eross, Andrea & Urquhart, Andrew & Wolfe, Simon, 2016. "Liquidity risk contagion in the interbank market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 45(C), pages 142-155.
    4. repec:kap:jbuset:v:147:y:2018:i:4:d:10.1007_s10551-017-3435-4 is not listed on IDEAS
    5. Aurelio F. Bariviera & M. Belen Guercio & Lisana B. Martinez & Osvaldo A. Rosso, 2015. "A permutation Information Theory tour through different interest rate maturities: the Libor case," Papers 1509.00217, arXiv.org.
    6. repec:eee:finsta:v:34:y:2018:i:c:p:136-149 is not listed on IDEAS

    More about this item

    Keywords

    LIBOR; financial crisis; scandal; interbank; banking; reference rate; interest rate;

    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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