Market Discipline and the Russian Interbank Market

39 Pages Posted: 17 Dec 2013

See all articles by Irina Andrievskaya

Irina Andrievskaya

National Research University Higher School of Economics

Maria Semenova

National Research University Higher School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2013

Abstract

The interbank market plays an important role in the overall function of the financial system. The efficiency of the interbank market, in turn, depends largely on its inherent disciplining mechanisms. This paper investigates the discipline mechanisms of Russia’s interbank market, testing the hypothesis that market discipline in Russia was strong enough to constrain excessive risk-taking by participating banks before, during, and after the 2008-2009 financial crisis. The existence of quantity-based market discipline is investigated using Heckman’s sample selection model and the efficiency of market discipline is studied with a panel data model. Our approach detects market discipline only during the financial crisis, not before or after. Even during the crisis, its efficiency in curbing bank risk-taking was rather low.

Keywords: market discipline, interbank market, risk-taking, banks, Russia

JEL Classification: G21, G01, P2

Suggested Citation

Andrievskaya, Irina and Semenova, Maria, Market Discipline and the Russian Interbank Market (November 29, 2013). BOFIT Discussion Paper No. 29/2013, Available at SSRN: https://ssrn.com/abstract=2368744 or http://dx.doi.org/10.2139/ssrn.2368744

Irina Andrievskaya (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Maria Semenova

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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