A pool of contingent liquidity? Monetary policy shocks and the Spanish interbank market in the 1950s-1960s

The development of a modern interbank money market in Spain as a mechanism of liquidity redistribution and a channel of monetary policy transmission dates back to the monetary reforms of the early 1970s. However, Spanish banks recorded traditionally substantial interbank positions. Did the system of interbank relationships play any role in liquidity management before the creation of a proper market? To answer this question, I assembled monthly data about interbank assets and liabilities of Spanish private banks, both at aggregate and bank level, from primary sources from the mid-1950s to the early 1970s. Aggregate data are based on the Statistical Bulletin of theBank of Spain, published since March 1960. Bank-level data have been hand-collected from monthly balance sheets reported by individual banks to the Bank of Spain. These balance sheets, available at the Historical Archive of the Bank of Spain, are used here for the first time for historical research. In the paper I analyze the rising relevance of interbank positions, both domestic and international, between the 1960s and theearly 1970s. I also explore the characteristics and use of interbank positions in a sam-ple of private banks for the period 1954-1969. For that purpose I calculate a set ofindicators that re ect di erences across banks in terms of net position, the share of interbank over total assets, the relevance of interbank liabilities as a source of funding, and the existence of dominant positions in interbank relationships. Finally I test empirically the response of interbank positions to contractionary monetary policy shocks in a cross-section of private banks. The results suggest differential effects depending on the monetary instrument used for policy purposes, the type of banks and their liquiditysituation.