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Central bank refinancing, interbank markets and the hypothesis of liquidity hoarding: evidence from a euro-area banking system

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  • Affinito, Massimiliano

Abstract

This paper tests the hypothesis of liquidity hoarding in the Italian banking system during the 2007-2011 global financial crisis. According to this hypothesis, in periods of crisis, interbank markets stop working and central banks' interventions are ineffective because banks hoard the liquidity injected rather than channelling it on to other banks and the real economy. The test uses monthly data at banking-group level for all intermediaries operating in Italy between January 1999 and August 2011. This is the first paper to use micro data to analyse the relationship between single banks' positions vis- JEL Classification: G21, E52, C30

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  • Affinito, Massimiliano, 2013. "Central bank refinancing, interbank markets and the hypothesis of liquidity hoarding: evidence from a euro-area banking system," Working Paper Series 1607, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20131607
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    Cited by:

    1. Daniele Pianeselli & Andrea Zaghini, 2014. "The cost of firms� debt financing and the global financial crisis," Temi di discussione (Economic working papers) 950, Bank of Italy, Economic Research and International Relations Area.
    2. Affinito, Massimiliano & Albareto, Giorgio & Santioni, Raffaele, 2022. "Purchases of sovereign debt securities by banks during the crisis: The role of balance sheet conditions," Journal of Banking & Finance, Elsevier, vol. 138(C).
    3. Affinito, Massimiliano & Franco Pozzolo, Alberto, 2017. "The interbank network across the global financial crisis: Evidence from Italy," Journal of Banking & Finance, Elsevier, vol. 80(C), pages 90-107.
    4. Miguel Sarmiento, 2016. "Market Discipline and Liquidity Risk: Evidence from the Interbank Funds Market," IHEID Working Papers 14-2016, Economics Section, The Graduate Institute of International Studies.
    5. Massimiliano Affinito & Matteo Piazza, 2021. "Always Look on the Bright Side? Central Counterparties and Interbank Markets during the Financial Crisis," International Journal of Central Banking, International Journal of Central Banking, vol. 17(1), pages 231-283, March.
    6. Graziella Morandi & Giulio Nicoletti, 2017. "Using microdata from monetary statistics to understand intra-group transactions and their implication in financial stability issues," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Data needs and Statistics compilation for macroprudential analysis, volume 46, Bank for International Settlements.
    7. Olivier Brossard & Susanna Saroyan, 2016. "Hoarding and short-squeezing in times of crisis: Evidence from the Euro overnight money market," Post-Print hal-01293693, HAL.
    8. Massimiliano Affinito, 2019. "What do almost 20 years of micro data and two crises say about the relationship between central bank and interbank market liquidity? Evidence from Italy," BIS Working Papers 821, Bank for International Settlements.
    9. Jef Boeckx & Maarten Dossche & Gert Peersman, 2017. "Effectiveness and Transmission of the ECB's Balance Sheet Policies," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 297-333, February.
    10. Lorenzo Burlon & Davide Fantino & Andrea Nobili & Gabriele Sene, 2016. "The quantity of corporate credit rationing with matched bank-firm data," Temi di discussione (Economic working papers) 1058, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    central bank refinancing; financial crisis; interbank market; liquidity;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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