How to Measure the Unsecured Money Market? The Eurosystem's Implementation and Validation Using TARGET2 Data

43 Pages Posted: 24 Jan 2013 Last revised: 4 Feb 2013

See all articles by Luca Arciero

Luca Arciero

Bank of Italy

Ronald Heijmans

De Nederlandsche Bank

Richard Heuver

De Nederlandsche Bank

Marco Massarenti

European Central Bank (ECB)

Cristina Picillo

Bank for International Settlements (BIS)

Francesco Vacirca

Bank of Italy

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2013

Abstract

This paper develops a methodology, based on Furfine (1999), to identify unsecured interbank money market loans from transaction data of the most important euro processing payment system, TARGET2, for maturity ranging from one day (overnight) up to three months. The implementation has been verified with (i) interbank money market transactions executed on the Italian trading platform e-MID and (ii) aggregated reporting by the EONIA panel banks. The Type 2 (false negative) error for the best performing algorithm setup is equal to 0.92%. The results focus on three levels: Eurosystem, core versus (geographical) periphery and countries (Italy and the Netherlands). The different stages of the global financial crisis and of the sovereign debt crises are clearly visible in the interbank money market, characterised by significant drops in the turnover. We find aggregated interest rates very close to the EONIA but we observe high heterogeneity across countries and market participants.

Keywords: euro interbank money market, Furfine, TARGET2, financial stability, EONIA

JEL Classification: E42, E44, E58, G01

Suggested Citation

Arciero, Luca and Heijmans, Ronald and Heuver, Richard and Massarenti, Marco and Picillo, Cristina and Vacirca, Francesco, How to Measure the Unsecured Money Market? The Eurosystem's Implementation and Validation Using TARGET2 Data (January 31, 2013). De Nederlandsche Bank Working Paper No. 369, Available at SSRN: https://ssrn.com/abstract=2206337 or http://dx.doi.org/10.2139/ssrn.2206337

Luca Arciero (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Ronald Heijmans

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Richard Heuver

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Marco Massarenti

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Cristina Picillo

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Francesco Vacirca

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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