Interbank money market concerns and actors’ strategies—A systematic review of 21st century literature

Morteza Alaeddini (), Philippe Madiès (), Paul Reaidy () and Julie Dugdale
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Morteza Alaeddini: AUT - Amirkabir University of Technology, CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, UGA - Université Grenoble Alpes, ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Philippe Madiès: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes
Paul Reaidy: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes
Julie Dugdale: LIG - Laboratoire d'Informatique de Grenoble - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes

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Abstract: Abstract As the reallocator of liquidity from banks with excess to banks with a deficit, the interbank money market (IMM) plays a fundamental role in the proper functioning of the banking system and the economy as a whole. The aggregate uncertainty derived from stochasticity of the overall level of the demand for short‐term liquidity and the likelihood of domino failures of tightly connected competitors who lend themselves vast amounts of liquidity explains the complexity of decisions in this environment. To identify the most significant factors influencing actors' strategies, we first present the five underlying patterns discovered through a bibliometric analysis of 609 scientific documents in this field: contagion and systemic risk, stability, market structure, relationship and trust, and default and failure. Then, our detailed study findings on 160 recent works indicate elements that affect central banks' strategies in reducing systemic risk and preventing financial contagion, as well as managing the interbank network in a way that makes it more stable and resilient to shocks to conserve market confidence. Furthermore, they address factors that influence banks' strategies to maintain their lending relationships and mitigate default risk. In addition to summarizing potential research directions, this paper provides market participants with a strategy fact‐sheet.

Date: 2023-04-01
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Published in Journal of Economic Surveys, 2023, 37 (2), pp.573-654. ⟨10.1111/joes.12495⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03583212

DOI: 10.1111/joes.12495

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