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The effect of underreporting on LIBOR rates

  • Andrea Monticini
  • Daniel L. Thornton

On May 29, 2008, the Wall Street Journal reported that several large international banks were reporting unjustifiably low LIBOR rates. Since then two large banks, Barclays and UBS, have paid significant fines for manipulating their LIBOR rates, and additional banks are expected to be fined. This paper investigates whether the underreporting of LIBOR rates by some banks significantly affected the reported LIBOR rate by testing whether there was a significant change in the relationship between the LIBOR rate and another rate that reflects the default risk of banks.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2013-008.

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Date of creation: 2013
Date of revision:
Handle: RePEc:fip:fedlwp:2013-008
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  1. Abrantes-Metz, Rosa M. & Kraten, Michael & Metz, Albert D. & Seow, Gim S., 2012. "Libor manipulation?," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 136-150.
  2. Daniel L. Thornton, 2009. "What the Libor-OIS spread says," Economic Synopses, Federal Reserve Bank of St. Louis.
  3. Donald W.K. Andrews & Christopher J. Monahan, 1990. "An Improved Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimator," Cowles Foundation Discussion Papers 942, Cowles Foundation for Research in Economics, Yale University.
  4. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  5. Rosa Abrantes-Metz & Sofia Villas-Boas & George Judge, 2011. "Tracking the Libor rate," Applied Economics Letters, Taylor & Francis Journals, vol. 18(10), pages 893-899.
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