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LIBOR: origins, economics, crisis, scandal, and reform

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Listed:
  • David Hou
  • David R. Skeie

Abstract

The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans. LIBOR's volatile behavior during the financial crisis provoked questions surrounding its credibility. Ongoing regulatory investigations have uncovered misconduct by a number of financial institutions. Policymakers across the globe now face the task of reforming LIBOR in the aftermath of the scandal and crisis.

Suggested Citation

  • David Hou & David R. Skeie, 2014. "LIBOR: origins, economics, crisis, scandal, and reform," Staff Reports 667, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:667
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    References listed on IDEAS

    as
    1. François-Louis Michaud & Christian Upper, 2008. "What drives interbank rates? Evidence from the Libor panel," BIS Quarterly Review, Bank for International Settlements, March.
    2. 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.
    3. Darrell Duffie & David R. Skeie & James Vickery, 2013. "A sampling-window approach to transactions-based Libor fixing," Staff Reports 596, Federal Reserve Bank of New York.
    4. Vincent Brousseau & Alexandre Chailloux & Alain Durré, 2009. "Interbank Offered Rate: Effects of the financial crisis on the information content of the fixing," Working Papers 2009-ECO-10, IESEG School of Management.
    5. Jacob Gyntelberg & Philip Wooldridge, 2008. "Interbank rate fixings during the recent turmoil," BIS Quarterly Review, Bank for International Settlements, March.
    6. John Taylor & John Williams, 2008. "Further Results on a Black Swan in the Money Market," Discussion Papers 07-046, Stanford Institute for Economic Policy Research.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    LIBOR; financial crisis; scandals; interbank; banking; reference rates; interest rates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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