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Merchants of Debt at the Extreme Overnight: Re-Considering Monetary Theories via Rollover-Induced Interbank Frictions

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  • Jessica Reale

Abstract

Banks’ refusal to roll over short-term interbank debts has received increased attention since the global financial crisis. Yet, heterodox monetary theories ignore interbank transactions and rollover channels despite recognising the importance of banks’ debt-renewal practices. Against this backdrop, this research contextualises banks’ refinancing vulnerabilities within heterodox monetary theories and relates them to the literature on rollover-induced interbank frictions. This study also reveals a further shock amplifier. Due to the interplay between maturity-rollover and market-funding liquidity cycles, a rollover-circuit may emerge. This circuit may lead to additional threats to the operation of the interbank market and financial stability, compelling monetary theories not to further neglect banks’ refinancing issues.

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  • Jessica Reale, 2025. "Merchants of Debt at the Extreme Overnight: Re-Considering Monetary Theories via Rollover-Induced Interbank Frictions," Review of Political Economy, Taylor & Francis Journals, vol. 37(1), pages 165-182, January.
    • Handle: RePEc:taf:revpoe:v:37:y:2025:i:1:p:165-182
    DOI: 10.1080/09538259.2023.2190015
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