TY - JOUR
T1 - LIBOR as a Keynesian beauty contest
T2 - a process of endogenous deception
AU - Stenfors, Alexis
N1 - This is an Accepted Manuscript of an article published in 'Review of political economy' on 13-06-2014, available online: http://www.tandfonline.com/10.1080/09538259.2014.917824
PY - 2014
Y1 - 2014
N2 - This paper uses the Keynesian Beauty Contest as a theoretical framework to analyse the London Interbank Offered Rate (LIBOR) fixing mechanism, where the actual money market rate is seen as a fundamental value towards which the LIBOR should aim. By treating the LIBOR as the outcome of a particular kind of p-beauty contest game, in which players (LIBOR banks) are guided by higher order beliefs, a process is created whereby they are not solely dependent on their own incentives and constraints. Instead, potential deception is generated endogenously though the fixing process itself, resulting in systematic deviations of the LIBOR from its fundamental value.
AB - This paper uses the Keynesian Beauty Contest as a theoretical framework to analyse the London Interbank Offered Rate (LIBOR) fixing mechanism, where the actual money market rate is seen as a fundamental value towards which the LIBOR should aim. By treating the LIBOR as the outcome of a particular kind of p-beauty contest game, in which players (LIBOR banks) are guided by higher order beliefs, a process is created whereby they are not solely dependent on their own incentives and constraints. Instead, potential deception is generated endogenously though the fixing process itself, resulting in systematic deviations of the LIBOR from its fundamental value.
KW - London Interbank Offered Rate
U2 - 10.1080/09538259.2014.917824
DO - 10.1080/09538259.2014.917824
M3 - Article
SN - 0953-8259
VL - 26
SP - 392
EP - 407
JO - Review of Political Economy
JF - Review of Political Economy
IS - 3
ER -