Improving Overnight Loan Identification in Payments Systems

Mark Rempel

Journal of Money, Credit and Banking, 2016, vol. 48, issue 2-3, 549-564

Abstract: Information on the allocation and pricing of over‐the‐counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction‐level data on the OTC interbank lending market. The veracity of the data identified, however, is not well established. Using permutation methods, I estimate an upper bound on the daily false positive rate of this algorithm to be between 10% and 20%. I propose refinements that reduce the bound to 10% or lower with negligible power loss. The results suggest that the inferred prices and quantities of overnight loans provide viable estimates of interbank lending market activity for Canadian data.

Date: 2016
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https://doi.org/10.1111/jmcb.12309

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Working Paper: Improving Overnight Loan Identification in Payments Systems (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:48:y:2016:i:2-3:p:549-564

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