Sidedness in the Interbank Market

30 Pages Posted: 12 May 2020 Last revised: 6 Jun 2022

See all articles by Celso Brunetti

Celso Brunetti

Board of Governors of the Federal Reserve System

Jeffrey H. Harris

American University - Department of Finance and Real Estate

Shawn Mankad

North Carolina State University - Department of Business Management

Date Written: June 1, 2022

Abstract

We study the motivations of traders in the interbank market around the 2007-2009 subprime crisis. We extend the market sidedness of Sarkar and Schwartz (2009) to a panel setting to study the dispersion of beliefs for banks domiciled in different European countries. We find that country-level sidedness reveals information from the interbank market: sidedness leads sovereign credit default swap (CDS) spreads and reacts to central bank interventions introduced during the crisis. Our results map the linkages between the interbank market and sovereigns, as well as provide insight on the channels that give rise to the sovereign-bank nexus.

Keywords: Sidedness, Liquidity, Credit Default Swaps

JEL Classification: G21, C10, G10

Suggested Citation

Brunetti, Celso and Harris, Jeffrey H. and Mankad, Shawn, Sidedness in the Interbank Market (June 1, 2022). Journal of Financial Markets, Vol. 59, 100663, 2022, Available at SSRN: https://ssrn.com/abstract=3578858 or http://dx.doi.org/10.2139/ssrn.3578858

Celso Brunetti

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jeffrey H. Harris

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-6669 (Phone)

Shawn Mankad (Contact Author)

North Carolina State University - Department of Business Management ( email )

Raleigh, NC 27695
United States

HOME PAGE: http://mankad-research.github.io/

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