The impact of the global financial crisis on the cross-currency linkage of LIBOR-OIS spreads

Philip Inyeob Ji, Francis In

Research output: Contribution to journalArticlepeer-review

21 Scopus citations

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.

Original languageEnglish
Pages (from-to)575-589
Number of pages15
JournalJournal of International Financial Markets, Institutions and Money
Volume20
Issue number5
DOIs
StatePublished - Dec 2010

Keywords

  • Cointegration
  • Global financial crisis
  • LIBOR-OIS spreads
  • Vector autoregressive model
  • Vector error correction

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