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The LIBOR eclipse: political economy of a benchmark

Research output: Working paperDiscussion paper

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The LIBOR eclipse : political economy of a benchmark. / Stenfors, Alexis; Lindo, Duncan.

London : Research on Money and Finance, Department of Economics, SOAS, University of London, 2016. (Discussion Papers; No. 47).

Research output: Working paperDiscussion paper

Harvard

Stenfors, A & Lindo, D 2016 'The LIBOR eclipse: political economy of a benchmark' Discussion Papers, no. 47, Research on Money and Finance, Department of Economics, SOAS, University of London, London. <http://www.researchonmoneyandfinance.org/index.php/publication/discussion-papers/203-rmf-47-stenfors-lindo>

APA

Stenfors, A., & Lindo, D. (2016). The LIBOR eclipse: political economy of a benchmark. (Discussion Papers; No. 47). Research on Money and Finance, Department of Economics, SOAS, University of London. http://www.researchonmoneyandfinance.org/index.php/publication/discussion-papers/203-rmf-47-stenfors-lindo

Vancouver

Stenfors A, Lindo D. The LIBOR eclipse: political economy of a benchmark. London: Research on Money and Finance, Department of Economics, SOAS, University of London. 2016 Jan. (Discussion Papers; 47).

Author

Stenfors, Alexis ; Lindo, Duncan. / The LIBOR eclipse : political economy of a benchmark. London : Research on Money and Finance, Department of Economics, SOAS, University of London, 2016. (Discussion Papers; 47).

Bibtex

@techreport{7e77fd81aec44e77b14e2ddec64c493f,
title = "The LIBOR eclipse: political economy of a benchmark",
abstract = "Up until around 2008 and the subsequent revelation of systematic manipulation, the integrity and {\textquoteleft}facticity{\textquoteright} of the London Interbank Offered Rate (LIBOR) were rarely questioned. Academics treated the LIBOR and the Eurodollar market as if they were synonyms. Central bankers conducted monetary policy as if the LIBOR was an objective reflection of the money market rate. Corporates and households entered into LIBOR-indexed financial contacts as if a money market was the underlying benchmark. This paper investigates how and why the LIBOR managed to maintain its status as a term for the competitive money market colloquially, professionally and in the economic literature for so long. By adopting a theoretical framework drawn from both Political Economy and Sociology, and applying it to the LIBOR-indexed derivatives market, it is shown how the benchmark{\textquoteright}s appearance betrays its fundamental nature. This process benefits certain actors within the market: the banks. Importantly, however, it also reveals how the LIBOR became, and remained, such an important benchmark and how it came to be perceived as an {\textquoteleft}objective fact{\textquoteright}.",
keywords = "LIBOR, benchmarks, derivatives, Eurodollar market, banks",
author = "Alexis Stenfors and Duncan Lindo",
year = "2016",
month = jan,
language = "English",
series = "Discussion Papers",
publisher = "Research on Money and Finance, Department of Economics, SOAS, University of London",
number = "47",
type = "WorkingPaper",
institution = "Research on Money and Finance, Department of Economics, SOAS, University of London",

}

RIS

TY - UNPB

T1 - The LIBOR eclipse

T2 - political economy of a benchmark

AU - Stenfors, Alexis

AU - Lindo, Duncan

PY - 2016/1

Y1 - 2016/1

N2 - Up until around 2008 and the subsequent revelation of systematic manipulation, the integrity and ‘facticity’ of the London Interbank Offered Rate (LIBOR) were rarely questioned. Academics treated the LIBOR and the Eurodollar market as if they were synonyms. Central bankers conducted monetary policy as if the LIBOR was an objective reflection of the money market rate. Corporates and households entered into LIBOR-indexed financial contacts as if a money market was the underlying benchmark. This paper investigates how and why the LIBOR managed to maintain its status as a term for the competitive money market colloquially, professionally and in the economic literature for so long. By adopting a theoretical framework drawn from both Political Economy and Sociology, and applying it to the LIBOR-indexed derivatives market, it is shown how the benchmark’s appearance betrays its fundamental nature. This process benefits certain actors within the market: the banks. Importantly, however, it also reveals how the LIBOR became, and remained, such an important benchmark and how it came to be perceived as an ‘objective fact’.

AB - Up until around 2008 and the subsequent revelation of systematic manipulation, the integrity and ‘facticity’ of the London Interbank Offered Rate (LIBOR) were rarely questioned. Academics treated the LIBOR and the Eurodollar market as if they were synonyms. Central bankers conducted monetary policy as if the LIBOR was an objective reflection of the money market rate. Corporates and households entered into LIBOR-indexed financial contacts as if a money market was the underlying benchmark. This paper investigates how and why the LIBOR managed to maintain its status as a term for the competitive money market colloquially, professionally and in the economic literature for so long. By adopting a theoretical framework drawn from both Political Economy and Sociology, and applying it to the LIBOR-indexed derivatives market, it is shown how the benchmark’s appearance betrays its fundamental nature. This process benefits certain actors within the market: the banks. Importantly, however, it also reveals how the LIBOR became, and remained, such an important benchmark and how it came to be perceived as an ‘objective fact’.

KW - LIBOR

KW - benchmarks

KW - derivatives

KW - Eurodollar market

KW - banks

M3 - Discussion paper

T3 - Discussion Papers

BT - The LIBOR eclipse

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

CY - London

ER -

ID: 3699645