Does the LIBOR misdirect monetary policy?: a case study on the NIBOR and Norges Bank 2007-11

Alexis Stenfors

Does the LIBOR misdirect monetary policy? a case study on the NIBOR and Norges Bank 2007-11

Alexis Stenfors

University of London

Research output: Book/Report › Monograph › peer-review

115 Downloads (Pure)

Abstract

This paper is an empirical investigation into the Norwegian Interbank Offered Rate (NIBOR) during 2007-2011. It is demonstrated that an informal rule change to the benchmark fixing mechanism, instigated by the NIBOR panel in September 2008, not only increased the susceptibility of the benchmark to deception, but fundamentally changed the decomposition of the Norwegian money market risk premium. The new NIBOR resulted in a greater dependency on the Eurozone money markets, and also came to include an additional risk premium variable: the ability of Eurozone banks to raise U.S. dollar funding. In sum, it is shown that Norway has faced both higher, and more volatile, money market risk premia since Q4 2008 – having considerable policy implications.

Original language	English
Place of Publication	London
Publisher	Research on Money and Finance, Department of Economics, SOAS, University of London
Number of pages	38
Publication status	Published - Feb 2013

Publication series

Name	Research on Money and Finance Discussion Paper
Publisher	Department of Economics, SOAS, University of London
No.	41

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 17 Partnerships for the Goals

Access to Document

STENFORS_Does the LIBOR Misdirect Monetary Policy
http://www.researchonmoneyandfinance.org/discussion-papers/
Accepted author manuscript (Post-print), 653 KB

http://www.researchonmoneyandfinance.org/discussion-papers/

Cite this

@book{2e394960dfb74de6b0a67bc1edd36e01,

title = "Does the LIBOR misdirect monetary policy?: a case study on the NIBOR and Norges Bank 2007-11",

abstract = "This paper is an empirical investigation into the Norwegian Interbank Offered Rate (NIBOR) during 2007-2011. It is demonstrated that an informal rule change to the benchmark fixing mechanism, instigated by the NIBOR panel in September 2008, not only increased the susceptibility of the benchmark to deception, but fundamentally changed the decomposition of the Norwegian money market risk premium. The new NIBOR resulted in a greater dependency on the Eurozone money markets, and also came to include an additional risk premium variable: the ability of Eurozone banks to raise U.S. dollar funding. In sum, it is shown that Norway has faced both higher, and more volatile, money market risk premia since Q4 2008 – having considerable policy implications.",

author = "Alexis Stenfors",

year = "2013",

month = feb,

language = "English",

series = "Research on Money and Finance Discussion Paper",

publisher = "Research on Money and Finance, Department of Economics, SOAS, University of London",

number = "41",

}

TY - BOOK

T1 - Does the LIBOR misdirect monetary policy?

T2 - a case study on the NIBOR and Norges Bank 2007-11

AU - Stenfors, Alexis

PY - 2013/2

Y1 - 2013/2

N2 - This paper is an empirical investigation into the Norwegian Interbank Offered Rate (NIBOR) during 2007-2011. It is demonstrated that an informal rule change to the benchmark fixing mechanism, instigated by the NIBOR panel in September 2008, not only increased the susceptibility of the benchmark to deception, but fundamentally changed the decomposition of the Norwegian money market risk premium. The new NIBOR resulted in a greater dependency on the Eurozone money markets, and also came to include an additional risk premium variable: the ability of Eurozone banks to raise U.S. dollar funding. In sum, it is shown that Norway has faced both higher, and more volatile, money market risk premia since Q4 2008 – having considerable policy implications.

AB - This paper is an empirical investigation into the Norwegian Interbank Offered Rate (NIBOR) during 2007-2011. It is demonstrated that an informal rule change to the benchmark fixing mechanism, instigated by the NIBOR panel in September 2008, not only increased the susceptibility of the benchmark to deception, but fundamentally changed the decomposition of the Norwegian money market risk premium. The new NIBOR resulted in a greater dependency on the Eurozone money markets, and also came to include an additional risk premium variable: the ability of Eurozone banks to raise U.S. dollar funding. In sum, it is shown that Norway has faced both higher, and more volatile, money market risk premia since Q4 2008 – having considerable policy implications.

M3 - Monograph

T3 - Research on Money and Finance Discussion Paper

BT - Does the LIBOR misdirect monetary policy?

PB - Research on Money and Finance, Department of Economics, SOAS, University of London

CY - London

ER -