Structural distortions in the Euro interbank market: the role of 'key players' during the recent market turmoil
Caterina Liberati (),
Massimiliano Marzo (),
Paolo Zagaglia and
MPRA Paper from University Library of Munich, Germany
We study the frictions in the patterns of trades in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use network-topology method on data from overnight transactions in the Electronic Market for Interbank Deposits (e-Mid) to investigate on two main issues. First, we characterize the division of roles between borrowers and lenders in long-run relations by providing evidence on network formation at a yearly frequency. Second, we identify the 'key players' in the marketplace and study their behaviour. Key players are ‘locally-central banks’ within a network that lend (or borrow) large volumes to (from) several counterparties, while borrowing (or lending) small volumes from (to) a small number of institutions. Our results are twofold. We show that the aggregate trading patterns in e-Mid are characterized by largely asymmetric relations. This implies a clear division of roles between lenders and borrowers. Second, the key players do not exploit their position of network leaders by imposing opportunistic pricing policies. We find that only a fraction of the networks composed by big players are characterized by interest rates that are statistically different from the average market rate throughout the turmoil period.
Keywords: market microstructure; network analysis; money markets; asset pricing (search for similar items in EconPapers)
JEL-codes: G10 D85 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-mon
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Working Paper: Structural distortions in the Euro interbank market: The role of 'key players' during the recent market turmoil (2012)
Working Paper: Structural distortions in the Euro interbank market: The role of ‘key players’ during the recent market turmoil (2012)
Working Paper: Structural Distortions in the Euro Interbank Market: The Role of 'Key Players' during the Recent Market Turmoil (2012)
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