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Explaining cross-border large-value payment flows: evidence from TARGET and EURO 1 data

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  • Rosati, Simonetta
  • Secola, Stefania

Abstract

We analyse the distribution of the TARGET cross-border interbank payment flows, from both a cross-section and time series point of view, using average daily data for the period 1999-2002. We find out that first, "location matters", in the sense that bilateral payment flows seem to reflect an organisation of interbank trading between countries whereby the size of the banking sectors, geographical proximity and cultural similarities play a significant role. This result is confirmed also by a model developed drawing on the gravity models literature. Second, we find that the payment traffic in TARGET is strongly affected by market technical deadlines. In addition, such traffic is positively related mainly to the liquidity conditions and to the turnover of the euro area money market, (particularly the unsecured overnight segment). Our model also provides a good explanation of the determinants of the interbank payments settled in the EURO 1 system. JEL Classification: E58, G20, G21

Suggested Citation

  • Rosati, Simonetta & Secola, Stefania, 2005. "Explaining cross-border large-value payment flows: evidence from TARGET and EURO 1 data," Working Paper Series 443, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2005443
    Note: 474635
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp443.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
    3. Heijmans, Ronald & Wendt, Froukelien, 2023. "Measuring the impact of a failing participant in payment systems," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(4).

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    More about this item

    Keywords

    EURO 1; euro area interbank market; location; payment systems; TARGET;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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