[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/mes/jeciss/v55y2021i2p565-573.html
   My bibliography  Save this article

Beyond LIBOR: Money Markets and the Illusion of Representativeness

Author

Listed:
  • Lilian Muchimba
  • Alexis Stenfors
Abstract
Money market benchmarks are important indicators for economic agents. They are also crucial for central banks in assessing the functioning of the interest rate channel of the monetary transmission mechanism. However, whereas the unsecured interbank money market conventionally has been seen as encompassing instruments with maturities up to one year, it appears as if it consists of two markets. The ultra-short-term money market (typically just one day) is large, liquid, and traded regularly. The term money market (one, three or six months), by contrast, is small, illiquid and rarely traded. This article explores the feasibility of creating and maintaining a money market benchmark which does not represent an underlying liquid market. From a sociological perspective, it addresses two critical aspects of financial benchmarks: (1) that they are related to but separate and distinct from the objects determining them and (2) that they are measurements and as such cannot be bought or sold (Stenfors and Lindo 2018). By doing so, the article also reflects upon the desire by financial regulators following the LIBOR manipulation scandal to replace estimation-based by transaction-based benchmarks, as well as some challenges and contradictions in conventional central banking theory.

Suggested Citation

  • Lilian Muchimba & Alexis Stenfors, 2021. "Beyond LIBOR: Money Markets and the Illusion of Representativeness," Journal of Economic Issues, Taylor & Francis Journals, vol. 55(2), pages 565-573, April.
    • Handle: RePEc:mes:jeciss:v:55:y:2021:i:2:p:565-573
    DOI: 10.1080/00213624.2021.1915085
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00213624.2021.1915085
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00213624.2021.1915085?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Donald Mackenzie & Fabian Muniesa & Lucia Siu, 2007. "Do Economists Make Markets? On the Performativity of Economics," Post-Print halshs-00149145, HAL.
    2. Stenfors, Alexis, 2018. "Bid-ask spread determination in the FX swap market: Competition, collusion or a convention?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 54(C), pages 78-97.
    3. Annina Kaltenbrunner & Juan Pablo Painceira, 2017. "The Impossible Trinity: Inflation Targeting, Exchange Rate Management and Open Capital Accounts in Emerging Economies," Development and Change, International Institute of Social Studies, vol. 48(3), pages 452-480, May.
    4. Andreas Schrimpf & Vladyslav Sushko, 2019. "Beyond LIBOR: a primer on the new benchmark rates," BIS Quarterly Review, Bank for International Settlements, March.
    5. Alexis Stenfors, 2019. "The Covered Interest Parity Puzzle and the Evolution of the Japan Premium," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(2), pages 417-424, April.
    6. George Argitis, 2008. "Inflation targeting and Keynes's political economy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 31(2), pages 249-270, December.
    7. Stenfors Alexis & Susai Masayuki, 2018. "High-Frequency Trading, Liquidity Withdrawal, and the Breakdown of Conventions in Foreign Exchange Markets," Journal of Economic Issues, Taylor & Francis Journals, vol. 52(2), pages 387-395, April.
    8. Donald MacKenzie & Fabian Muniesa & Lucia Siu, 2007. "Introduction to Do Economists Make Markets? On the Performativity of Economics," Introductory Chapters, in: Donald MacKenzie & Fabian Muniesa & Lucia Siu (ed.),Do Economists Make Markets? On the Performativity of Economics, Princeton University Press.
    9. Chatziantoniou, Ioannis & Gabauer, David & Stenfors, Alexis, 2020. "From CIP-deviations to a market for risk premia: A dynamic investigation of cross-currency basis swaps," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 69(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lilian Muchimba, 2021. "Could transaction-based financial benchmarks be susceptible to collusive behaviour?," Working Papers in Economics & Finance 2021-11, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    2. Alexis Stenfors & Lilian Muchimba, 2023. "The Anatomy of Three Scandals: Conspiracies, Beauty Contests, and Sabotage in OTC Markets," Journal of Economic Issues, Taylor & Francis Journals, vol. 57(2), pages 538-545, April.
    3. Lilian Muchimba, 2022. "Connectedness of money market instruments: A time-varying vector autoregression approach," Working Papers in Economics & Finance 2022-07, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leon Wansleben, 2013. "Dreaming with BRICs," Journal of Cultural Economy, Taylor & Francis Journals, vol. 6(4), pages 453-471, November.
    2. Loconto, Allison & Rajão, Raoni, 2020. "Governing by models: Exploring the technopolitics of the (in)visilibities of land," Land Use Policy, Elsevier, vol. 96(C).
    3. Aleksandra Kuzior & Aleksy Kwilinski & Ihor Hroznyi, 2021. "The Factorial-Reflexive Approach to Diagnosing the Executors’ and Contractors’ Attitude to Achieving the Objectives by Energy Supplying Companies," Energies, MDPI, vol. 14(9), pages 1-16, April.
    4. Dawn Thilmany & Lilian Brislen & Hailey Edmondson & Mackenzie Gill & Becca B. R. Jablonski & Jairus Rossi & Tim Woods & Samantha Schaffstall, 2021. "Novel methods for an interesting time: Exploring U.S. local food systems’ impacts and initiatives to respond to COVID," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(4), pages 848-877, October.
    5. François-Xavier de Vaujany & Sabine Carton & Carine Dominguez-Perry & Emmanuelle Vaast, 2012. "Performativity and Information Technologies: An inter-organizational perspective," Post-Print halshs-00851315, HAL.
    6. Franck Cochoy & Martin Giraudeau & Liz McFall, 2010. "Performativity, Economics And Politics," Journal of Cultural Economy, Taylor & Francis Journals, vol. 3(2), pages 139-146, July.
    7. Heidi Østbø Haugen, 2018. "The unmaking of a commodity: Intermediation and the entanglement of power cables in Nigeria," Environment and Planning A, , vol. 50(6), pages 1295-1313, September.
    8. Benjamin Braun, 2016. "From performativity to political economy: index investing, ETFs and asset manager capitalism," New Political Economy, Taylor & Francis Journals, vol. 21(3), pages 257-273, May.
    9. Chatziantoniou, Ioannis & Gabauer, David & Stenfors, Alexis, 2020. "From CIP-deviations to a market for risk premia: A dynamic investigation of cross-currency basis swaps," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 69(C).
    10. Kristin Asdal & Béatrice Cointe, 2022. "Writing good economics: how texts 'on the move' perform the lab and discipline of experimental economics," Post-Print hal-03429169, HAL.
    11. Kristin Asdal & Béatrice Cointe, 2021. "Experiments in co-modification: a relational take on the becoming of commodities and the making of market value," Post-Print hal-03168937, HAL.
    12. Alexis Stenfors & Ioannis Chatziantoniou & David Gabauer, 2022. "The Evolution of Monetary Policy Focal Points," Journal of Economic Issues, Taylor & Francis Journals, vol. 56(2), pages 348-355, April.
    13. Stenfors, Alexis & Susai, Masayuki, 2021. "Spoofing and pinging in foreign exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    14. Miguel Poiares Maduro & Giulio Pasi & Gianluca Misuraca, 2018. "Social Impact Investment in the EU. Financing strategies and outcome oriented approaches for social policy innovation: narratives, experiences, and recommendations," JRC Research Reports JRC111373, Joint Research Centre.
    15. Alexis Stenfors, 2019. "The Covered Interest Parity Puzzle and the Evolution of the Japan Premium," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(2), pages 417-424, April.
    16. Tommaso Pardi, 2019. "Fourth industrial revolution concepts in the automotive sector: performativity, work and employment," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(3), pages 379-389, September.
    17. Taylor C. Nelms, 2012. "The Zombie Bank And The Magic Of Finance," Journal of Cultural Economy, Taylor & Francis Journals, vol. 5(2), pages 231-246, May.
    18. Patrick J. L. Cockburn, 2014. "Street Papers, Work and Begging: 'Experimenting' at the Margins of Economic Legitimacy," Journal of Cultural Economy, Taylor & Francis Journals, vol. 7(2), pages 145-160, May.
    19. Sven Modell, 2014. "The societal relevance of management accounting: An introduction to the special issue," Accounting and Business Research, Taylor & Francis Journals, vol. 44(2), pages 83-103, April.
    20. Faulconbridge, James R. & Muzio, Daniel, 2021. "Valuation devices and the dynamic legitimacy-performativity nexus: The case of PEP in the English legal profession," Accounting, Organizations and Society, Elsevier, vol. 91(C).

    More about this item

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:jeciss:v:55:y:2021:i:2:p:565-573. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MJEI20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.