Time-varying financial stress linkages: Evidence from the LIBOR-OIS spreads

Inyeob Philip Ji

doi:10.1016/j.intfin.2012.04.001

Time-varying financial stress linkages: Evidence from the LIBOR-OIS spreads

Inyeob Philip Ji

Research output: Contribution to journal › Article › Research › peer-review

7 Citations (Scopus)

Abstract

The present article studies the dynamic linkages between the LIBOR-OIS spreads of major currencies for the period of March 1, 2006 to November 12, 2008. The Dynamic Conditional Correlation model is employed to examine the impact of the global financial crisis on the cross-currency correlations of the spreads. The overall evidence suggests that the crisis increased the degree of money market integration of the Australian dollar, the Euro and the Sterling with the US dollar. The Japanese Yen appears to have been insulated from the US dollar shortage shocks throughout the period. In addition, the FX swap market liquidity plays an important role in explaining the market integration, whereas the credit worthiness difference between the LIBOR panel banks is a less significant factor.

Original language	English
Pages (from-to)	647 - 657
Number of pages	11
Journal	Journal of International Financial Markets, Institutions and Money
Volume	22
Issue number	4
DOIs	https://doi.org/10.1016/j.intfin.2012.04.001
Publication status	Published - 2012

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10.1016/j.intfin.2012.04.001

Cite this

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title = "Time-varying financial stress linkages: Evidence from the LIBOR-OIS spreads",

abstract = "The present article studies the dynamic linkages between the LIBOR-OIS spreads of major currencies for the period of March 1, 2006 to November 12, 2008. The Dynamic Conditional Correlation model is employed to examine the impact of the global financial crisis on the cross-currency correlations of the spreads. The overall evidence suggests that the crisis increased the degree of money market integration of the Australian dollar, the Euro and the Sterling with the US dollar. The Japanese Yen appears to have been insulated from the US dollar shortage shocks throughout the period. In addition, the FX swap market liquidity plays an important role in explaining the market integration, whereas the credit worthiness difference between the LIBOR panel banks is a less significant factor.",

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