NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Market-specific and Currency-specific Risk During the Global Financial Crisis: Evidence from the Interbank Markets in Tokyo and London

Shin-ichi Fukuda

NBER Working Paper No. 16962
Issued in April 2011
NBER Program(s):   IFM

This paper explores how international money markets reflected credit and liquidity risks during the global financial crisis. After matching the currency denomination, we investigate how the Tokyo Interbank Offered Rate (TIBOR) was synchronized with the London Interbank Offered Rate (LIBOR) denominated in the US dollar and the Japanese yen. Regardless of the currency denomination, TIBOR was highly synchronized with LIBOR in tranquil periods. However, the interbank rates showed substantial deviations in turbulent periods. We find remarkable asymmetric responses in reflecting market-specific and currency-specific risks during the crisis. The regression results suggest that counter-party credit risk increased the difference across the markets, while liquidity risk caused the difference across the currency denominations. They also support the view that a shortage of US dollar as liquidity distorted the international money markets during the crisis. We find that coordinated central bank liquidity provisions were useful in reducing liquidity risk in the US dollar transactions. But their effectiveness was asymmetric across the markets.

download in pdf format
   (323 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w16962

Published: Fukuda, Shin-ichi, 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, Elsevier, vol. 36(12), pages 3185-3196. citation courtesy of

Users who downloaded this paper also downloaded* these:
Taylor and Williams w13943 A Black Swan in the Money Market
Eichengreen, Park, and Shin w16919 When Fast Growing Economies Slow Down: International Evidence and Implications for China
Puri, Rocholl, and Steffen w16967 Global retail lending in the aftermath of the US financial crisis: Distinguishing between supply and demand effects
Adams Brown, Jr. Book III, Part III: What Was Restored - A Decentralized International Financial System
Adams Brown, Jr. Book II, Part I: The Post-War Stabilization Problem
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us