How to measure the unsecured money market? The Eurosystem�s implementation and validation using TARGET2 data

Luca Arciero, Ronald Heijmans, Richard Heuver, Marco Massarenti (), Cristina Picillo and Francesco Vacirca ()
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Marco Massarenti: European Central Bank
Francesco Vacirca: Bank of Italy

No 215, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper develops a methodology, based on Furfine (1999), for identifying unsecured interbank money market loans from the transaction data of the most important euro payment processing system TARGET2, for maturities ranging from one day (overnight) up to three months. The implementation has been verified with (i) interbank money market transactions executed on the e-MID Italian electronic trading platform and (ii) aggregated reporting by the EONIA panel banks. The Type2 (false negative) error for the best performing algorithm setup is 0.92%. We find aggregated interest rates very close to the EONIA but observe a high degree of heterogeneity across countries and market participants. The different stages of the global financial crisis and of the sovereign debt crises are clearly revealed in the interbank money market by significant drops in turnover. The results focus on three levels: euro-area, country group and country (Italy and the Netherlands).

Keywords: euro interbank money market; Furfine; TARGET2; financial stability; EONIA (search for similar items in EconPapers)
JEL-codes: E42 E44 E58 G01 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-ban, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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