tailieunhanh - Implicit intraday interest rate in the UK unsecured overnight money market

The competing reactions reveal diverging views around the possibilities and limits of microfinance, a polarization captured colorfully by Connie Bruck (2006) in The New Yorker. Yet there are also areas of shared vision. Most important, all agree that the demand for reliable financial services is huge. We estimate that roughly 40 to 80 percent of the populations in most developing economies lack access to formal sector banking services (Beck, Demirguc-Kunt and Martinez Peria, 2007; World Bank, 2007). All sides agree that access to reliable financial services might help hundreds of millions, perhaps billions, of low-income people currently. | Working Paper No. 447 Implicit intraday interest rate in the UK unsecured overnight money market Marius Jurgilas and Filip Zikes March 2012 Working papers describe research in progress by the author s and are published to elicit comments and to further debate. Any views expressed are solely those of the author s and so cannot be taken to represent those of the Bank of England or to state Bank of England policy. This paper should therefore not be reported as representing the views of the Bank of England or members of the Monetary Policy Committee or Financial Policy Committee. BANK OF ENGLAND Working Paper No. 447 Implicit intraday interest rate in the UK unsecured overnight money market Marius Jurgilas 1 2 and Filip Zikes 21 Abstract This paper estimates the intraday value of money implicit in the UK unsecured overnight money market. Using transactions data on overnight loans advanced through the UK large-value payments system CHAPS in 2003-09 we find a positive and economically significant intraday interest rate. While the implicit intraday interest rate is quite small pre-crisis it increases more than tenfold during the financial crisis of 2007-09. The key interpretation is that an increase in the implicit intraday interest rate reflects the increased opportunity cost of pledging collateral intraday and can be used as an indicator to gauge the stress of the payment system. We obtain qualitatively similar estimates of the intraday interest rate using quoted intraday bid and offer rates and confirm that our results are not driven by the intraday variation in the bid-ask spread. Key words Interbank money market intraday liquidity. JEL classification E42 E58 G21. 1 Norges Bank. Email 2 Bank of England. Email The views expressed in this paper are those of the authors and not necessarily those of the Bank of England or the Norges Bank. The authors wish to thank Rodney Garratt Peter Zimmerman Karim M Abadir