Liberati, Caterina and Marzo, Massimiliano and Zagaglia, Paolo and Zappa, Paola (2012): Structural distortions in the Euro interbank market: the role of 'key players' during the recent market turmoil.
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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.
|Item Type:||MPRA Paper|
|Original Title:||Structural distortions in the Euro interbank market: the role of 'key players' during the recent market turmoil|
|Keywords:||market microstructure; network analysis; money markets; asset pricing|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G10 - General
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory
G - Financial Economics > G0 - General > G01 - Financial Crises
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Paolo Zagaglia|
|Date Deposited:||23. Jul 2012 13:21|
|Last Modified:||15. Feb 2013 23:01|
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