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Identifying term interbank loans from Fedwire payments data

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Abstract
Interbank markets for term maturities experienced great stress during the 2007-09 financial crisis, as illustrated by the behavior of the one- and three-month Libor. Despite widespread interest in these markets, little data is available on dollar interbank lending for maturities beyond overnight. We develop a methodology to infer information about individual term dollar interbank loans settled through the Fedwire Funds Service, the large-value bank payment system operated by the Federal Reserve Banks. We find a sharp increase in the dispersion of inferred term interbank interest rates, a shortening of loan maturities, and a decline in term lending volume following the failure of Lehman Brothers in September 2008. Several diagnostic tests suggest that our approach provides a useful source of information about the term interbank market, allowing for a number of research applications.

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  • Dennis Kuo & David R. Skeie & James Vickery & Thomas Youle, 2013. "Identifying term interbank loans from Fedwire payments data," Staff Reports 603, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:603
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    Cited by:

    1. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2016. "How to Measure the Unsecured Money Market: The Eurosystem’s Implementation and Validation Using TARGET2 Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 247-280, March.
    2. Saroyan, Susanna, 2024. "Counterparty choice, maturity shifts and market freezes: Lessons from the European interbank market," Journal of Economic Dynamics and Control, Elsevier, vol. 160(C).
    3. Mark Rempel, 2016. "Improving Overnight Loan Identification in Payments Systems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 549-564, March.
    4. Acharya, Viral V. & Skeie, David, 2011. "A model of liquidity hoarding and term premia in inter-bank markets," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 436-447.
    5. S. Gabrieli & C.-P. Georg, 2014. "A network view on interbank market freezes," Working papers 531, Banque de France.
    6. Gries, Thomas & Mitschke, Alexandra, 2019. "Systemic instability of the interbank credit market: A contribution to a resilient financial system," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203582, Verein für Socialpolitik / German Economic Association.
    7. Konstantin Milbradt & Martin Oehmke, 2014. "Maturity Rationing and Collective Short-Termism," NBER Working Papers 19946, National Bureau of Economic Research, Inc.
    8. Adam Ashcraft & James Mcandrews & David Skeie, 2011. "Precautionary Reserves and the Interbank Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s2), pages 311-348, October.
    9. Ritz, Robert A. & Walther, Ansgar, 2015. "How do banks respond to increased funding uncertainty?," Journal of Financial Intermediation, Elsevier, vol. 24(3), pages 386-410.
    10. L. Bargigli & G. di Iasio & L. Infante & F. Lillo & F. Pierobon, 2015. "The multiplex structure of interbank networks," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 673-691, April.
    11. Nuria Boot & Timo Klein & Maarten Pieter Schinkel, 2017. "Collusive Benchmark Rates Fixing," Tinbergen Institute Discussion Papers 17-122/VII, Tinbergen Institute, revised 17 Apr 2019.
    12. Ivan Alves & Stijn Ferrari & Pietro Franchini & Jean-Cyprien Heam & Pavol Jurca & Sam Langfield & Sebastiano Laviola & Franka Liedorp & Antonio Sánchez & Santiago Tavolaro & Guillaume Vuillemey, 2013. "The structure and resilience of the European interbank market," ESRB Occasional Paper Series 03, European Systemic Risk Board.
    13. Kraenzlin, Sébastien & Nellen, Thomas, 2015. "Access policy and money market segmentation," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 1-12.
    14. Anna Kovner & David R. Skeie, 2013. "Evaluating the quality of fed funds lending estimates produced from Fedwire payments data," Staff Reports 629, Federal Reserve Bank of New York.
    15. Ben R. Craig & Yiming Ma, 2020. "Intermediation in the Interbank Lending Market," Working Papers 20-09, Federal Reserve Bank of Cleveland.
    16. Bluhm, Marcel, 2018. "Persistent liquidity shocks and interbank funding," Journal of Financial Stability, Elsevier, vol. 36(C), pages 246-262.
    17. Nuria Boot & Timo Klein & Maarten Pieter Schinkel, 2017. "Collusive Benchmark Rates Fixing," Discussion Papers of DIW Berlin 1715, DIW Berlin, German Institute for Economic Research.
    18. Saroyan, Susanna, 2022. "Counterparty choice, maturity shifts and market freezes: lessons from the e-MID interbank market," INET Oxford Working Papers 2022-28, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    19. Milbradt, Konstantin & Oehmke, Martin, 2015. "Maturity rationing and collective short-termism," Journal of Financial Economics, Elsevier, vol. 118(3), pages 553-570.
    20. Anthony Brassil & Helen Hughson & Mark McManus, 2016. "Identifying Interbank Loans from Payments Data," RBA Research Discussion Papers rdp2016-11, Reserve Bank of Australia.
    21. Milbradt, Konstantin & Oehmke, Martin, 2015. "Maturity rationing and collective short-termism," LSE Research Online Documents on Economics 84513, London School of Economics and Political Science, LSE Library.
    22. Beltran, Daniel O. & Bolotnyy, Valentin & Klee, Elizabeth, 2021. "The federal funds network and monetary policy transmission: Evidence from the 2007–2009 financial crisis," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 187-202.

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    More about this item

    Keywords

    interbank markets; loan; Fedwire; algorithm;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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