The impact of the global financial crisis on the cross-currency linkage of LIBOR–OIS spreads |
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| Authors: | Philip Inyeob Ji Francis In |
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| Institution: | 1. Department of Finance, Ming Chuan University, Taipei, Taiwan, ROC;2. Department of Banking and Finance, TamKang University, Tamsui, New Taipei City, Taiwan;1. Cardano Risk Management, The Netherlands;2. Econometric Institute, Erasmus University Rotterdam, KAS Bank, The Netherlands;3. Erasmus School of Economics, Erasmus University Rotterdam, APG Asset Management, The Netherlands;4. Econometric Institute, Erasmus University Rotterdam, Tinbergen Institute, The Netherlands |
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| Abstract: | This article examines the impact of global financial crisis on cross-currency linkage of the LIBOR–OIS spread, a financial stress measure in interbank markets. The impulse response analysis is conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. The overall evidence suggests that the crisis has substantially changed the nature of the cross-currency interactions in liquidity stress. Also global money markets have failed to contain stress in US dollar funding and the role of the Japanese yen as a liquidity source appears to be significant, while these two currencies drive the cross-currency system of liquidity stress. |
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