Implicit intraday interest rate in the UK unsecured overnight money market

Marius Jurgilas and Filip Zikes ()
Additional contact information
Filip Zikes: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 447, Bank of England working papers from Bank of England

Abstract: This paper estimates the intraday value of money implicit in the UK unsecured overnight money market. Using transactions data on overnight loans advanced through the UK large-value payments system (CHAPS) in 2003-09, we find a positive and economically significant intraday interest rate. While the implicit intraday interest rate is quite small pre-crisis, it increases more than tenfold during the financial crisis of 2007-09. The key interpretation is that an increase in the implicit intraday interest rate reflects the increased opportunity cost of pledging collateral intraday and can be used as an indicator to gauge the stress of the payment system. We obtain qualitatively similar estimates of the intraday interest rate using quoted intraday bid and offer rates and confirm that our results are not driven by the intraday variation in the bid-ask spread.

Keywords: Interbank money market; intraday liquidity (search for similar items in EconPapers)
JEL-codes: E42 E58 G21 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-03-19
New Economics Papers: this item is included in nep-ban, nep-mac, nep-mon and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Implicit intraday interest rate in the UK unsecured overnight money market (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0447

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