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    Drivers of demand and supply in the Euro interbank market: the role of “Key Players” during the recent turmoil


    Liberati, Caterina and Marzo, Massimiliano and Zagaglia, Paolo and Zappa, Paola (2015) Drivers of demand and supply in the Euro interbank market: the role of “Key Players” during the recent turmoil. Financial Markets and Portfolio Management, 29 (3). pp. 207-250. ISSN 1934-4554

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    Abstract

    We study frictions in trading patterns in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use a network-topology method on data from overnight transactions in the ElectronicMarket for Interbank Deposits (e-MID) to investigate two main issues. First, we characterize the roles of borrowers and lenders in long-run relationships by providing evidence on network formation at a 3-month frequency. Second, we identify the “key players” in the marketplace and study their behavior. In our formalization, 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 difference in the roles of lenders and borrowers, with market positions changing only gradually over time.We also find that the large net lenders exploit their positions as network leaders by imposing aggressive pricing policies on their counterparties.

    Item Type: Article
    Keywords: Market microstructure; Network analysis; Money markets; Money supply; Network Formation and Analysis: Theory; Financial Crises; General Financial Markets; Banks; Depository Institutions; Micro Finance Institutions; Mortgages;
    Academic Unit: Faculty of Social Sciences > School of Business
    Item ID: 11291
    Identification Number: https://doi.org/10.1007/s11408-015-0251-7
    Depositing User: Paola Zappa
    Date Deposited: 15 Oct 2019 16:40
    Journal or Publication Title: Financial Markets and Portfolio Management
    Publisher: Springer Nature
    Refereed: Yes
    URI:

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