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Multiple equilibrium overnight rates in a dynamic interbank market game

  • Jens Tapking

    (European Central Bank)

We analyse a two period model of the interbank market, i.e. the market at which banks trade liquidity. We assume that banks do not take the interbank interest rate as given, but ultilaterally negotiate on interest rates and transaction volumes. The solution concept applied is the Shapley value. We show that there is a multiplicity of average equilibrium interest rates of the Þrst period so that the average interest rate in this period does not convey any information on the expected liquidity situation at the interbank market.

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File URL: http://128.118.178.162/eps/fin/papers/0409/0409042.pdf
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Paper provided by EconWPA in its series Finance with number 0409042.

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Date of creation: 16 Sep 2004
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Handle: RePEc:wpa:wuwpfi:0409042
Note: Type of Document - pdf
Contact details of provider: Web page: http://128.118.178.162

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  1. Hartmann, Philipp & Manna, Michele & Manzanares, Andres, 2001. "The microstructure of the euro money market," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 895-948, November.
  2. Paolo Angelini, 2002. "Liquidity and Announcement Effects in the Euro Area," Temi di discussione (Economic working papers) 451, Bank of Italy, Economic Research and International Relations Area.
  3. Hart, Sergiu & Mas-Colell, Andreu, 1996. "Bargaining and Value," Econometrica, Econometric Society, vol. 64(2), pages 357-80, March.
  4. Perez-Castrillo, David & Wettstein, David, 2001. "Bidding for the Surplus : A Non-cooperative Approach to the Shapley Value," Journal of Economic Theory, Elsevier, vol. 100(2), pages 274-294, October.
  5. Gabriel Pérez Quirós & Hugo Rodríguez, 2000. "The daily market for funds in Europe: Has something changed with the EMU?," Economics Working Papers 474, Department of Economics and Business, Universitat Pompeu Fabra.
  6. 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.
  7. Jens Tapking, 2004. "The Eurosystem’s Standing Facilities in a General Equilibrium Model of the European Interbank Market," Finance 0409019, EconWPA.
  8. Butnariu, Dan & Klement, Erich Peter, 1996. "Core, Value and Equilibria for Market Games: On a Problem of Aumann and Shapley," International Journal of Game Theory, Springer, vol. 25(2), pages 149-60.
  9. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January.
  10. Välimäki, Tuomas, 2001. "Fixed rate tenders and the overnight money market equilibrium," Research Discussion Papers 8/2001, Bank of Finland.
  11. Ho, Thomas S Y & Saunders, Anthony, 1985. " A Micro Model of the Federal Funds Market," Journal of Finance, American Finance Association, vol. 40(3), pages 977-88, July.
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