Please Wait! Your file will start to download within 10 seconds automatically. Otherwise click here Download

Interbank overnight lending rate pass-through Bangkok Interbank Offered Rate (BIBOR) during the period of financial crisis: In case of Thailand’s Interbank Market (2005 to 2011)

Author(s)

Gongkhonkwa Rujira , Wang Zongjun ,

Download Full PDF Pages: 55-67 | Views: 535 | Downloads: 121 | DOI: 10.5281/zenodo.3405741

Volume 2 - March 2013 (03)

Abstract

A global financial crisis was happened began from the end of 2007 till nowadays which that crisis was affected to the other market around the world. Hence this paper focus on the Interbank overnight lending rate and Bangkok Interbank Offered Rate (BIBOR) behavior, a long-run relationship, and pass-through between the financial turmoil and BIBOR in case of Thailand Interbank market that cover the sample period from January 2005 to December 2011. This study findings, firstly the Interbank overnight lending and BIBOR spreads are highest in period B than period A, and period C, however we also find the Interbank overnight lending spread’s variance grew due to in May 2007 to August 2009 (during the crisis period). In addition the response of Interbank overnight lending spread to BIBOR for a long-term BIBOR spread has a variance less than a short-term BIBOR and the changes in a short-term relation are stronger for Interbank overnight lending rate, BIBOR 1w, BIBOR 1m, BIBOR 2m, and BIBOR 3m more than BIBOR 6m, BIBOR 9m, and BIBOR 1y, however they have a long-run relationship to each other. 

Keywords

Interbank Overnight Lending Rate, Bangkok Interbank Offered Rate (BIBOR), Interbank Spread Rate

References

                  i.        Adrienne A. Kearney. (2002), “The changing impact of employment announcements on interest rates”. Journal of Economics and Business, Vol. 54, pp. 415-429.

    ii.        Ben R. Craig, Falko Fecht and Gunseli Tumer-Alkan (2012). The role of Interbank relationship and liquidity needs.

   iii.        Bernanke and Gertler. (1987), “Monetary factors in the great depression”. Journal of Monetary Economics, Vol. 19, pp. 145-169.

   iv.        Bhagwan Chowdhry. (2000), “Defaults and interest rates in international lending”. Pacific-Basin Finance Journal, Vol. 8, pp.135-152.

    v.        Charlotte Christiansen. (2002), “Credit spreads and the term structure of interest rates”. International Review of Financial Analysis, Vol. 11, pp. 279-295.

   vi.        Deborah Gefang, Gary Koop and Simon M. Potter. (2011), “Understanding liquidity and credit risk in the financial crisis”. Journal of Empirical Finance, Vol. 18, pp. 903-914.

 vii.        Dietmar Harhoff and Timm Korting. (1998), “Lending relationships in Germany—Empirical evidence from survey data”. Journal of Banking & Finance, Vol. 22, pp. 1317-1353.

viii.        Dragon Yongjun Tang and Hong Yan. (2010), “Market conditions, default risk and credit spreads”. Journal of Banking & Finance, Vol. 34, pp. 743-753.

   ix.        Eric C. Chang, Moon-Whoan Rhee and Kit Pong Wong. (1995), “A note on the spread between the rates of fixed and variable rate loans”. Journal of Banking & Finance, Vol. 19, pp. 1479-1487.

    x.        Falko Fecht, Kjell G. Nyborg and Jorg Rocholl. (2008), “Liquidity management and overnight rate calendar effects: Evidence from German banks”. North American Journal of Economics and Finance, Vol. 19, pp. 7-12.

   xi.        Falko Fecht, Kjell G. Nybort and Jorg Rocholl. (2011), “The price of liquidity: The effects of market conditions and bank characteristics”. Journal of Financial Economics, Vol. 102, pp. 344-362.

 xii.        Franklin Allen, Elena Carletti and Gouglas Gale. (2009), “Interbank market liquidity and central bank intervention”. Journal of Monetary Economics, Vol. 56, pp. 639-652.

xiii.        Hakan Berument, Zubeyir Kilinc and Umit Ozlale. (2004), “The effects of different inflation risk premiums on interest rate spreads”. Physic A, Vol. 333, pp. 317-324.

xiv.        Hamid Baghestani. (2010), “How well do experts predict interbank loan rates and spread?”. Economics Letters, Vol. 109, pp. 4-6.

 xv.        Hong-Ghi Min, Duk-Hee Lee, Changi Nam, Myeong-Cheol Park and Sang-Ho Mam. (2003), “Determinants of emerging-market bond spreads: cross-country evidence”. Global Finance Journal, Vol. 14, pp. 271-286.

xvi.        Jens Tapking. (2006), “Multiple equilibrium overnight rates in a dynamic interbank market game”. Games and Economic Behavior, Vol. 56, pp. 350-370.

xvii.        Jianxin Wang. (1999), “Asymmetric information and the bid-ask spread: a empirical comparison between automated order execution and open outcry auction”. Journal of International Financial Markets, Institutions and Money, Vol. 9, pp. 115-128.

xviii.        Joao F. Cocco, Francisco J. Gomes and Nuno C. Martins. (2009), “Lending relationships in the interbank market”. Journal of Finance Intermediation, Vol. 18, pp. 24-48.

xix.        Johann Burgstaller and Johann Scharler. (2010), “How do bank lending rates and the supply of loans reach to shifts in loan demand in the U.K.”. Journal of Policy Modeling, Vol. 32, pp. 778-791.

 xx.        Joseph L. McCauley. (2008), “Nonstationarity of efficient finance markets: FX market evolution from stability to instability”. International Review of Financial Analysis, Vol. 17, pp. 820-837.

xxi.        Kit Pong Wong. (1997), “On the determinants of bank interest margins under credit and interest rate risks”. Journal of Banking & Finance, Vol. 21, pp. 251-271.

xxii.        Kiyotaka Nakashima and Makoto Saito. (2009), “Credit spreads and corporate bonds and the macroeconomy in Japan”. Journal of the Japanese and International Economies. Vol. 23, pp. 309-331.

xxiii.        Lamont K. Black. (2011), “Insider rates versus outsider rates in lending”. Finance Research Letters, Vol. 8, pp. 180-187.

xxiv.        Lee A. Smales, “30-Day Interbank futures: Investigating the process of price discovery following RBA cash target rate announcements”. Working paper. Journal of International Financial Markets, Institutions & Money.

xxv.        Manthos D. Delis and Georgios P. Kouretas. (2011), “Interest rate and bank risk-taking”. Journal of Banking & Finance, Vol. 35, pp. 840-855.

xxvi.        Mark J. Flannery, Allaudeen S. Hameed and Richard H. Harjes. (1997), “Asset pricing, time-varying risk premia and interest rate risk”. Journal of Banking & Finance, Vol. 21, pp. 315-335.

xxvii.        Mathias Drehmann, SSteffen Sorensen and Marco Stringa. (2010), “The integrated impact of credit and interest rate risk on banks: A dynamic framework and stress testing application”. Journal of Banking & Finance, Vol. 34, pp. 713-729.

xxviii.        Mathias Moersch. (1996), “Predicting Output with a Money Market Spread”. Journal of Economics and Business, Vol. 48, pp. 185-199.

xxix.        Mingshu Hua. (2009), “A study on foreign exchange dealers’ bid-ask spread quote behavior”. Pacific-Basin Finance Journal, Vol. 17, pp. 506-523.

xxx.        M.M.G. Fase. (1995), “The demand for commercial bank loans and the lending rate”. European Economic Review, Vol. 39, pp. 99-115.

xxxi.        Nicola Carcano and Silverio Foresi. (1997), “Hedging against interest rate risk: Reconsidering volatility-adjusted immunization”. Journal of Banking & Finance, Vol. 21, pp. 127-141.

xxxii.        Nuno Cassola and Claudio Morana. (2012), “Euro money market spreads during the 2007-? Financial crisis”. Journal of Empirical Finance, Vol. 19, pp. 548-557.

xxxiii.        Noh-San Kwark. (2002), “Default risks, interest rate spreads, and business cycles: Explaining the interest rate spread as a leading indicator”. Journal of Economic Dynamics & Control, Vol. 26, pp. 271-302.

xxxiv.        R. Todd smith and Henry van Egteren. (2005), “Interest rate smoothing and financial stability”. Review of Financial Economics, Vol. 14, pp. 147-171.

xxxv.        Robert A. Jarrow. (2011), “Credit market equilibrium theory and evidence: Revisiting the structural versus reduced form credit risk model debate”. Financial Research Letters, Vol. 8, pp. 2-7.

xxxvi.        R.W. Faff and P.F. Howard. (1999), “Interest rate risk of Australian financial sector companies in a period of regulatory change”. Pacific-Basin Finance Journal, Vol. 7, pp. 83-101.

xxxvii.        Shin-Ichi Fukuda. (2012), “Market-specific and currency-specific risk during the global financial crisis: Evidence from the interbank markets in Tokyo and London”. Journal of Banking & Finance, Vol. 36, pp. 3185-3196

xxxviii.        Srinivas Nippani and Stanley D. Smith. (2010), “The increasing default risk of US Treasury securities due to the financial crisis”. Journal of Banking & Finance, Vol. 34, pp. 2472-2480.

xxxix.        Takashi Hatakeda. (2000), “Bank lending behaviour under a liquidity constraint”. Japan and the World Economy, Vol. 12, pp. 127-141.

   xl.        Vitor Gaspar, Gabriel Perez Quiros and Hugo Rodriguez Mendizabal. (2008), “Interest rate dispersion and volatility in the market for daily funds”. European Economic Review, Vol. 52, pp. 413-440. http://www.wikipedia.org, access on 8 August 2012

    xli.            Zhangkai Huang. (2003), “Evidence of a bank lending channel in the UK”. Journal of Banking & Finance, Vol. 27, pp. 491-510.

Cite this Article: