The Effectiveness of Central Bank Interventions During the First Phase of the Subprime Crisis / Heiko Hesse, Nathaniel Frank.

Format:

Book

Government document

Author/Creator:

Hesse, Heiko.

Contributor:

Frank, Nathaniel.

International Monetary Fund. Middle East and Central Asia Department.

Series:

IMF Working Papers; Working Paper ; No. 2009/206

IMF Working Papers

Language:

English

Subjects (All):

Banks and banking, Central.

Global Financial Crisis, 2008-2009.

Subprime mortgage loans.

Liquidity (Economics).

Monetary policy.

Physical Description:

28 p. : ill.

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2009.

Language Note:

English

Summary:

This paper provides evidence that central bank interventions had a statistically significant impact on easing stress in unsecured interbank markets during the first phase of the subprime crisis which began in July 2007. Extraordinary liquidity provisions, such as the Term Auction Facility by the Federal Reserve, are analyzed. First a decomposition of the Libor-OIS spread indicates that credit premia increased in importance as the crisis deepened. Second, using Markov switching models, central bank operations are then graphically associated with reductions in term funding stress. Finally, bivariate VAR and GARCH models are adopted to econometrically quantified these impacts. While helpful in compressing Libor spreads, the economic magnitudes of central interventions have overall not been very large.

Contents:

Intro

Contents

I. Introduction

II. Review of Developments and Policy Interventions

III. Empirical Analysis

IV. Bivariate GARCH Framework

V. Policy Implications and Conclusions

References

Figures

1. U.S., U.K., and Euro Area Libor-OIS Spreads

2. Decomposition of U.S. and Euro Area Libor-OIS Spreads

3. Decomposition of Libor-OIS Spreads

4. Markov Switching Mean-Variance Model for Euro Area and U.S. Libor-OIS Spreads

5. Markov Switching ARCH Model for Euro Area and U.S. Libor-OIS Spreads

6. Impulse Response Functions of Bivariate VAR Model

Tables

1. Markov Switching Parameters for Levels and Volatility Models

2. Bivariate VAR Model

3. Impact of Central Bank Interventions on LIBOR-OIS Spreads.

Notes:

"September 2009."

Description based on print version record.

ISBN:

9786612844126

9781462334575

1462334571

9781282844124

1282844121

9781451873535

1451873530

9781452736945

1452736944

OCLC:

469975181