Template-Type: ReDIF-Paper 1.0
Author-Name: Angelo Baglioni
Author-X-Name-First: Angelo
Author-X-Name-Last: Baglioni
Author-Email: angelo.baglioni@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica


Author-Name: Andrea Monticini
Author-X-Name-First: Andrea
Author-X-Name-Last: Monticini
Author-Email: andrea.monticini@unicatt.it
Author-Workplace-Name: DISCE, Università Cattolica


Title: The intraday interest rate under a liquidity crisis:
the case of August 2007
Abstract: By analyzing high frequency data for the European interbank market, we
show that the intraday interest rate (implicitly defined by the term structure of the ON
rate) jumped by more than ten times at the outset of the financial turmoil in August 2007,
resulting in an inefficiency of the money market. This took place despite the provision of
unlimited free daylight overdrafts by the ECB, on a collateralized basis. We suggest that
such result may be attributed to an increase of the liquidity premium and of the cost of
collateral.

Length: nn pages 16
Creation-Date: 2008-09

File-URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0083.pdf
File-Format: Application/pdf
File-Function: First version, 2008
Number: ief0083
Classification-JEL: G3
Keywords: intraday interest rate, liquidity crisis, money market, central banking
Handle: RePEc:ctc:serie3:ief0083