Identifying term interbank loans from Fedwire payments data
Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of one- and three-month Libor. Despite widespread interest in these markets, little data are available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer individual term dollar interbank loans (for maturities between two days and one year) by applying a set of filters to payments settled on the Fedwire Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. Our approach introduces several innovations and refinements relative to previous research by Furfine (1999) and others that measures overnight interbank lending. Diagnostic tests to date suggest our approach provides a novel and useful source of information about the term interbank market, allowing for a number of research applications. Limitations of the algorithm and caveats on its use are discussed in detail. We also present stylized facts based on the algorithm's results, focusing on the 2007-09 period. At the crisis peak following the failure of Lehman Brothers in September 2008, we observe a sharp increase in the dispersion of inferred term interbank interest rates, a shortening of loan maturities, and a decline in term lending volume.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.ny.frb.org/rmaghome/staff_rp/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bech, Morten L. & Klee, Elizabeth, 2011.
"The mechanics of a graceful exit: Interest on reserves and segmentation in the federal funds market,"
Journal of Monetary Economics,
Elsevier, vol. 58(5), pages 415-431.
- Morten L. Bech & Elizabeth Klee, 2009. "The mechanics of a graceful exit: interest on reserves and segmentation in the federal funds market," Staff Reports 416, Federal Reserve Bank of New York.
- Morten L. Bech & Elizabeth Klee, 2010. "The mechanics of a graceful exit: interest on reserves and segmentation in the federal funds market," Finance and Economics Discussion Series 2010-07, Board of Governors of the Federal Reserve System (U.S.).
- 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.
- Viral V. Acharya & David Skeie, 2011. "A model of liquidity hoarding and term premia in inter-bank markets," Staff Reports 498, Federal Reserve Bank of New York.
- Acharya, Viral V & Skeie, David, 2011. "A Model of Liquidity Hoarding and Term Premia in Inter-Bank Markets," CEPR Discussion Papers 8705, C.E.P.R. Discussion Papers.
- Q. Farooq Akram & Casper Christophersen, 2010. "Interbank overnight interest rates - gains from systemic importance," Working Paper 2010/11, Norges Bank.
- Ben Craig & Goetz von Peter, 2010.
"Interbank tiering and money center banks,"
BIS Working Papers
322, Bank for International Settlements.
- Ben R. Craig & Goetz von Peter, 2010. "Interbank tiering and money center banks," Working Paper 1014, Federal Reserve Bank of Cleveland.
- Craig, Ben R. & von Peter, Goetz, 2010. "Interbank tiering and money center banks," Discussion Paper Series 2: Banking and Financial Studies 2010,12, Deutsche Bundesbank, Research Centre.
- Ben R. Craig & Goetz von Peter, 2009. "Interbank tiering and money center banks," Working Paper 0912, Federal Reserve Bank of Cleveland.
- Ronald Heijmans & Richard Heuver & Dani�lle Walraven, 2011. "Monitoring the unsecured interbank money market using TARGET2 data," DNB Working Papers 276, Netherlands Central Bank, Research Department.
- Furfine, Craig H, 2001. "Banks as Monitors of Other Banks: Evidence from the Overnight Federal Funds Market," The Journal of Business, University of Chicago Press, vol. 74(1), pages 33-57, January.
- Todd Keister & James McAndrews, 2009.
"Why are banks holding so many excess reserves?,"
380, Federal Reserve Bank of New York.
- Paolo Angelini & Andrea Nobili & Maria Cristina Picillo, 2009.
"The interbank market after August 2007: what has changed, and why?,"
Temi di discussione (Economic working papers)
731, Bank of Italy, Economic Research and International Relations Area.
- Paolo Angelini & Andrea Nobili & Cristina Picillo, 2011. "The Interbank Market after August 2007: What Has Changed, and Why?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 923-958, 08.
- Wetherilt, Anne & Zimmerman, Peter & Soramaki, Kimmo, 2010. "The sterling unsecured loan market during 2006-08: insights from network theory," Bank of England working papers 398, Bank of England.
- Darrell Duffie & David Skeie & James Vickery, 2013. "A sampling-window approach to transactions-based Libor fixing," Staff Reports 596, Federal Reserve Bank of New York.
- Olivier Armantier & Adam Copeland, 2012. "Assessing the quality of “Furfine-based” algorithms," Staff Reports 575, Federal Reserve Bank of New York.
- Acharya, Viral V & Schnabl, Philipp & Suarez, Gustavo, 2012.
"Securitization Without Risk Transfer,"
CEPR Discussion Papers
8769, C.E.P.R. Discussion Papers.
- Gara Afonso & Anna Kovner & Antoinette Schoar, 2010.
"Stressed, not frozen: the Federal Funds market in the financial crisis,"
437, Federal Reserve Bank of New York.
- Gara Afonso & Anna Kovner & Antoinette Schoar, 2011. "Stressed, Not Frozen: The Federal Funds Market in the Financial Crisis," Journal of Finance, American Finance Association, vol. 66(4), pages 1109-1139, 08.
- Adam Copeland & Antoine Martin & Michael Walker, 2010. "The tri-party repo market before the 2010 reforms," Staff Reports 477, Federal Reserve Bank of New York.
- F.R. Liedorp & L. Medema & M. Koetter & R.H. Koning & I. van Lelyveld, 2010. "Peer monitoring or contagion? Interbank market exposure and bank risk," DNB Working Papers 248, Netherlands Central Bank, Research Department.
When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:603. 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: (Amy Farber)
If references are entirely missing, you can add them using this form.