IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/3090.html
   My bibliography  Save this paper

The Overnight Interbank Market: Evidence from the G7 and the Euro Zone

Author

Listed:
  • Bartolini, Leonardo
  • Bertola, Giuseppe
  • Prati, Alessandro

Abstract

We study the interbank markets for overnight loans of the major industrial countries, linking the behaviour of short-term interest rates to the operating procedures of these countries’ central banks. We find that many of the key behavioural features of US federal funds rates, on which previous studies have focused, are not robust to changes in institutional details, along both cross-sectional and time-series dimensions of the data. Our results indicate that central banks’ operating procedures and intervention styles play a crucial role in shaping empirical features of short-term interest rates’ day-to-day behaviour in industrial countries.

Suggested Citation

  • Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "The Overnight Interbank Market: Evidence from the G7 and the Euro Zone," CEPR Discussion Papers 3090, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3090
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3090
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

    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. Lasser, Dennis J., 1992. "The effect of contemporaneous reserve accounting on the market for federal funds," Journal of Banking & Finance, Elsevier, vol. 16(6), pages 1047-1056, December.
    2. Griffiths, Mark D. & Winters, Drew B., 1995. "Day-of-the-week effects in federal funds rates: Further empirical findings," Journal of Banking & Finance, Elsevier, vol. 19(7), pages 1265-1284, October.
    3. Spindt, Paul A. & Hoffmeister, J. Ronald, 1988. "The Micromechanics of the Federal Funds Market: Implications for Day-of-the-Week Effects in Funds Rate Variability," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(04), pages 401-416, December.
    4. Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 137-159, February.
    5. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    6. Hamilton, James D, 1997. "Measuring the Liquidity Effect," American Economic Review, American Economic Association, vol. 87(1), pages 80-97, March.
    7. Campbell, John Y, 1987. "Money Announcements, the Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 56-67, February.
    8. 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.
    9. Aspetsberger, A., 1996. "Open Market Operations in EU Countries," Papers 3, European Monetary Institute.
    10. Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2001. "Banks' reserve management, transaction costs, and the timing of Federal Reserve intervention," Journal of Banking & Finance, Elsevier, vol. 25(7), pages 1287-1317, July.
    11. James A. Clouse & Douglas W. Elmendorf, 1997. "Declining required reserves and the volatility of the federal funds rate," Finance and Economics Discussion Series 1997-30, Board of Governors of the Federal Reserve System (U.S.).
    12. Allen, Linda & Saunders, Anthony, 1992. "Bank window dressing: Theory and evidence," Journal of Banking & Finance, Elsevier, vol. 16(3), pages 585-623, June.
    13. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
    14. Balduzzi, Pierluigi, et al, 1998. "Interest Rate Targeting and the Dynamics of Short-Term Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(1), pages 26-50, February.
    15. Paul Bennett & Stavros Peristiani, 2002. "Are U.S. reserve requirements still binding?," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 53-68.
    16. Clouse, James A. & Dow Jr., James P., 1999. "Fixed costs and the behavior of the federal funds rate," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 1015-1029, July.
    17. James A. Clouse, 1994. "Recent developments in discount window policy," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Nov, pages 965-977.
    18. Andersen, Torben G. & Lund, Jesper, 1997. "Estimating continuous-time stochastic volatility models of the short-term interest rate," Journal of Econometrics, Elsevier, vol. 77(2), pages 343-377, April.
    19. Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
    20. Barrett, W. Brian & Slovin, Myron B. & Sushka, Marie E., 1988. "Reserve regulation and recourse as a source of risk premia in the federal funds market," Journal of Banking & Finance, Elsevier, vol. 12(4), pages 575-584, December.
    21. Balduzzi, Pierluigi & Bertola, Giuseppe & Foresi, Silverio, 1997. "A model of target changes and the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 223-249, July.
    22. Bindseil, Ulrich & Seitz, Franz, 2001. "The supply and demand for Eurosystem deposits - The first 18 months," Working Paper Series 0044, European Central Bank.
    23. Stavros Peristiani, 1998. "The Growing Reluctance To Borrow At The Discount Window: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 611-620, November.
    24. Brunner, Allan D & Lown, Cara S, 1993. "The Effects of Lower Reserve Requirements on Money Market Volatility," American Economic Review, American Economic Association, vol. 83(2), pages 199-205, May.
    25. Roberds, William & Runkle, David & Whiteman, Charles H, 1996. "A Daily View of Yield Spreads and Short-Term Interest Rate Movements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 34-53, February.
    26. Rudebusch, Glenn D., 1995. "Federal Reserve interest rate targeting, rational expectations, and the term structure," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 245-274, April.
    27. Kopecky, Kenneth J. & Tucker, Alan L., 1993. "Interest rate smoothness and the nonsettling-day behavior of banks," Journal of Economics and Business, Elsevier, vol. 45(3-4), pages 297-314.
    28. Hayashi, Fumio, 2001. "Identifying a Liquidity Effect in the Japanese Interbank Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 287-315, May.
    29. Paul Bennett & R. Spence Hilton, 1997. "Falling reserve balances and the federal funds rate," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(May).
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    central bank operating procedures; interest rates; reserve requirements;

    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cpr:ceprdp:3090. 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: .

    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 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.

    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.