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The Intraday Price of Money: Evidence from the e‐MID Interbank Market
Author(s) -
BAGLIONI ANGELO,
MONTICINI ANDREA
Publication year - 2008
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2008.00171.x
Subject(s) - interest rate , interbank lending market , monetary economics , economics , basis point , settlement (finance) , overnight rate , money market , tick size , financial economics , econometrics , monetary policy , central bank , quantitative easing , finance , market liquidity , payment
We provide empirical evidence, based on tick‐by‐tick data for the e‐MID euro area interbank market covering 2003 and 2004, that the overnight interest rate shows a clear downward pattern throughout the operating day. Thus, a positive hourly interest rate (half basis point) implicitly emerges from the intraday term structure of the overnight rate. Such a pattern was not detected in the mid‐1990s: we explain this evolution as an outcome of the recent trend toward real‐time settlement. The estimated intraday interest rate is lower than in the United States: this is due to the different cost of central bank daylight credit.