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Multiple equilibrium overnight rates in a dynamic interbank market game

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  • Tapking, Jens

Abstract

We analyse a two period model of the interbank market, i.e. the market at which banks trade liquidity. We assume that banks do not take the interbank interest rate as given, but ultilaterally negotiate on interest rates and transaction volumes. The solution concept applied is the Shapley value. We show that there is a multiplicity of average equilibrium interest rates of the Þrst period so that the average interest rate in this period does not convey any information on the expected liquidity situation at the interbank market.
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  • Tapking, Jens, 2006. "Multiple equilibrium overnight rates in a dynamic interbank market game," Games and Economic Behavior, Elsevier, vol. 56(2), pages 350-370, August.
    • Handle: RePEc:eee:gamebe:v:56:y:2006:i:2:p:350-370
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    7. Tapking, Jens, 2002. "The Eurosystem's Standing Facilities in a General Equilibrium Model of the European Interbank Market," Discussion Paper Series 1: Economic Studies 2002,20, Deutsche Bundesbank.
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    Cited by:

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    4. Rainone, Edoardo, 2020. "The network nature of over-the-counter interest rates," Journal of Financial Markets, Elsevier, vol. 47(C).

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