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Money Markets (money + market)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

GERMAN ECONOMIC REVIEW, Issue 2 2006
Alain Durré
Expectations hypothesis; money market; liquidity premium; cointegration analysis Abstract. This paper investigates to what extent the expectations hypothesis of the term structure (EHTS) of interest rates receives some support since the launch of the European single currency. Empirical evidence shows that in general this theory applies to most European countries, and to Germany in particular. The objective of this paper thus is twofold. First, the EHTS for the German money market and for a larger sample including the German mark period and the euro money market is tested in order to check whether the results for the former are affected by the new financial environment since January 1999. Second, the implications of the results for the monetary policy assessment are discussed. We estimate cointegrating vector autoregressive models in order to quantify the level of the liquidity premium. The results suggest that financial markets do not consider the monetary policy of the European Central Bank simply as the one prevailing during the German period. [source]

Greek Monetary Economics in Retrospect: The Adventures of the Drachma

ECONOMIC NOTES, Issue 3 2005
Sophia Lazaretou
This paper enumerates the adventures of the drachma step by step, dividing its story into seven parts. Specifically, its main purpose is to present some historical perspective on the behaviour of the monetary and fiscal policies pursued in Greece during the period from the early 1830s until the introduction of the euro. For Greece, the lessons of historical experience are very important. Since the formation of the modern Greek state, government officials have striven , sometimes making hard efforts , to keep abreast of international monetary developments. This was because they understood that the participation of a peripheral, poor and inflation-prone country with a weak currency and an underdeveloped money market, like Greece of the time, in a monetary club of powerful economies could improve her international credit standing and imply important benefits in terms of exchange rate and monetary stability, and long-term foreign borrowing. [source]

The Liquidity Premium in the Money Market: A Comparison of the German Mark Period and the Euro Area

Gradualism, Transparency and the Improved Operational Framework: A Look at Overnight Volatility Transmission,

INTERNATIONAL FINANCE, Issue 2 2009
Silvio Colarossi
This paper proposes a possible way of assessing the effect on interest rate dynamics of changes in the decision-making method, in the communication strategy and in the operational framework of a central bank. Through a generalized autoregressive conditional heteroscedasticity (GARCH) specification, we show that the United States and the euro area displayed a limited but significant spillover of volatility from money market to longer-term rates. We then checked the stability of this phenomenon in the most recent period of improved policy-making and found empirical evidence to show that the transmission of overnight volatility along the yield curve had entirely disappeared. [source]

Bank Mergers, Competition, and Liquidity

JOURNAL OF MONEY, CREDIT AND BANKING, Issue 5 2007
ELENA CARLETTI
credit market competition; bank reserves; internal money market; banking system liquidity; monetary operations We model the impact of bank mergers on loan competition, reserve holdings, and aggregate liquidity. A merger changes the distribution of liquidity shocks and creates an internal money market, leading to financial cost efficiencies and more precise estimates of liquidity needs. The merged banks may increase their reserve holdings through an internalization effect or decrease them because of a diversification effect. The merger also affects loan market competition, which in turn modifies the distribution of bank sizes and aggregate liquidity needs. Mergers among large banks tend to increase aggregate liquidity needs and thus the public provision of liquidity through monetary operations of the central bank. [source]

The impact of the euro on Europe's financial markets

FINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 3 2003
Gabriele Galati
This paper presents an overview of the impact of the introduction of the euro on Europe's financial structure over the first four years since the start of EMU. It analyzes changes in money markets, bond markets, equity markets and foreign exchange markets. Euro's role in originating or catalyzing trends has been uneven across the spectrum of financial markets. From the supply side, banks and investors in fixed income markets have become more focused on the characteristics of individual borrowers rather than the nationality of the issuer and have built up expertise to evaluate credit risk. European equity markets have also been affected by the enhanced ability of investors to build strategies with a pan-European perspective as prices increasingly reflected risk factors specific to industrial sectors rather than individual countries. On the borrower side, EMU has increased the attractiveness of market-based financing methods by allowing debt issuers to tap institutional portfolios across the euro area. Lower barriers to cross-border financial transactions have also increased the contestability of the market for financial services, be it at the wholesale or the retail level. The introduction of the euro has also highlighted the shortcomings of existing institutional structures and areas where excessive focus on narrowly defined interests may stand in the way of realizing the full potential benefits from the new environment. Diverging legal and institutional infrastructures and market practices can impede further financial market development and deepening. Hence, the euro has put a premium on cooperation between national authorities and institution as a means of achieving a more harmonized financial environment. The impact of EMU on depth in foreign exchange markets has been less clear-cut, as volatility, spreads, trading volumes and liquidity appear not to have changed in a substantial way. Overall, it seems that the new currency has made some progress towards the goal of becoming a currency of international stature that would rival that of the US dollar. However, a number of the necessary next steps towards achieving this goal are also among the trickiest to implement. [source]

Volatility linkages of the equity, bond and money markets: an implied volatility approach

ACCOUNTING & FINANCE, Issue 1 2009
Kent Wang
G12; G14 Abstract This study proposes an alternative approach for examining volatility linkages between Standard & Poor's 500, Eurodollar futures and 30 year Treasury Bond futures markets using implied volatility from the three markets. Simple correlation analysis between implied volatilities in the three markets is used to assess market correlations. Spurious correlation effects are considered and controlled for. I find that correlations between implied volatilities in the equity, money and bond markets are positive, strong and robust. Furthermore, I replicate the approach of Fleming, Kirby and Ostdiek (1998) to check the substitutability of the implied volatility approach and find that the results are nearly identical; I conclude that my approach is simple, robust and preferable in practice. I also argue that the results from this paper provide supportive evidence on the information content of implied volatilities in the equity, bond and money markets. [source]

Dimensions of financial integration in Greater China: money markets, banks and policy effects

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2005
Yin-Wong Cheung
Abstract The financial linkages between the People's Republic of China (hereafter ,China') and the other Greater China economies of Hong Kong and Taiwan are assessed, and compared against those of China with Singapore, Japan and the United States. For both sets of links, there is evidence that ex post uncovered interest parity tends to hold over longer periods, and the magnitude of the parity deviations is shrinking over time. The deviations depend upon the extent of capital controls, and in certain cases, exchange rate volatility. However, while the money markets of China are increasingly linked to money markets in the rest of the world, our empirical results suggest that the banking sector,the main source of capital for Chinese firms,remains insulated. Copyright © 2005 John Wiley & Sons, Ltd. [source]

SIVs: Could you survive a financial collapse?

JOURNAL OF CORPORATE ACCOUNTING & FINANCE, Issue 4 2008
Michael Ehrlich
The newspapers are suddenly full of worries about structured investment vehicles (SIVs). These are huge, risky investment instruments used by large banks and hedge funds. But fund managers of major companies have invested in money markets, which in turn,unknown to the company fund managers,have invested in the risky SIVs. Any major collapse of the SIVs could spread financial panic. So what are corporate managers to do? Are there strategies to avoid financial disaster? And what questions should auditors ask right now? © 2008 Wiley Periodicals, Inc. [source]

Mutual, non-profit or public interest company?

ANNALS OF PUBLIC AND COOPERATIVE ECONOMICS, Issue 2 2002
An evaluation of options for the ownership, control of water utilities
The purpose of this paper is to evaluate various organizational models for the ownership and control of natural monopolies , specifically the infrastructure of water and sewage provision in England and Wales. First, it summarizes recent discussion of who should own water assets in Britain. The paper notes the opportunity that has arisen for increased consumer involvement, and examines the relative merits of three models that have been suggested as alternatives: a non-profit trust or company, a public interest company, and a consumer mutual. Five criteria are suggested for evaluating the merits of each type: its ability to safeguard the interests of the most important stakeholder, the consumer; avoid the necessity for a heavy regulatory regime; incentivize management to manage efficiently but without ,producer capture'; raise capital relatively cheaply; and resist pressures to demutualize. The paper agrees with the recent paper in this Journal by Morse (2000) that, in theory, the consumer mutual has advantages. It draws on Hansmann's work that suggests consumer ownership of water would be less costly than investor-ownership, providing there are no large conflicts of interest between different types of consumer. Hansmann's thesis is expanded to consider the likely benefits from wider member participation, and the hidden costs of not taking members into account. It then tests out whether customers would be motivated in practice to be active members, introducing a theoretical model of what motivates members of co-operatives and mutuals to participate. The conclusions are that provided managers and board members are committed to encouraging member participation, the consumer mutual model would work well. It would need only light regulation, would avoid producer capture, and would be able to raise capital fairly easily, both from money markets and from members. It would need legislation to prevent it from being demutualized at some time in the future. However, if a participatory corporate culture cannot be guaranteed, or if there is a risk of decline of participation over time, other options such as a non-profit trust or a public interest company would be less risky. [source]