Fragmentation in the Euro overnight unsecured money market

Abstract

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Monetary Policy Transmission with Interbank Market Fragmentation

“…Such risks have been a major cause of disturbance of financial markets in recent years and in particular of interbank markets. The existence of a country-specific credit risk for euro area banks has been documented empirically, for instance, in Gilchrist and Mojon (2018) and Garcia de Andoain, Hoffmann, and Manganelli (2014).…”

Unsecured and Secured Funding

“…We contribute to the existing empirical literature on interbank funding by jointly analyzing unsecured, secured borrowing and lending at the bank level. The existing empirical literature focuses on individual segments of the wholesale funding market, such as the unsecured money market in the United States (Ashcraft and Duffie, 2007;Afonso, Kovner, and Schoar, 2011a), in the euro area (Brunetti, di Filippo, and Harris, 2011;Angelini, Nobili, and Picillo, 2011;Garcia-de-Andoain, Hoffmann, and Manganelli, 2014;Garcia-de-Andoain et al, 2016;Perignon, Thesmar, and Vuillemey, 2018), and in the United Kingdom (Acharya and Merrouche, 2013). Similarly, exiting papers study secured money markets in isolation, covering the United States (Gorton and Metrick, 2012;Krishnamurthy, Nagel, and Orlov, 2014;Copeland, Martin, and Walker, 2014) and…”

The national segmentation of euro area bank balance sheets during the financial crisis

“…Abbassi et al, 2015;Garcia-de-Andoain et al, 2014). By distinguishing not only between domestic and crossborder flows but also between intra-euro area and extra-euro area flows, our richer model provides greater insight.…”