Interpreting deviations from covered interest parity during the financial market turmoil of 2007-08

Journal of Banking and Finance

Volumn 33, Issue 11, 2009, Pages 1953-1962

  Baba, Naohiko ^a   Packer, Frank ^a  

^a BANK FOR INTERNATIONAL SETTLEMENTS   (Switzerland)

Author keywords

Counterparty risk; Covered interest parity; Financial market turmoil; FX swap; US dollar swap lines; US dollar term auction facility

Indexed keywords

EID: 70249126135     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2009.05.007     Document Type: Article

References (28)

1. Akram F., Rime D., and Sarno L. Arbitrage in the foreign exchange market: Turning on the microscope. Journal of International Economics 76 (2008) 237-253
2. Akram F., Rime D., and Sarno L. Does the law of one price hold in International Financial Markets? Evidence from tick data. Journal of Banking and Finance 33 (2009) 1741-1754
3. Baba N., Packer F., and Nagano T. The spillover of money market turbulence to FX swap and cross-currency swap markets. BIS Quarterly Review (2008) 73-86
4. Beine M., Janssen G., and Lecourt C. Should central bankers talk to the foreign exchange markets?. Journal of International Money and Finance 28 (2009) 776-803
5. Bank for International Settlements (BIS), 2008. Annual Report, Section VI, 92-116.
6. Borio C., and Nelson W. Monetary operations and the financial turmoil. BIS Quarterly Review (2008) 31-46
7. Brunnermeier M.K. Deciphering the liquidity and credit crunch 2007-08. Journal of Economic Perspectives 23 (2009) 77-100
8. Brunnermeier, M.K., Nagel, S., Pedersen, L., 2009. Carry trades and currency crashes. NBER Macroeconomic Annual 2008.
9. Burnside, C., Eichenbaum, M., Kleshchelski, I., Rebelo, S., 2008. Do peso problems explain the returns to the carry trade? NBER Working Paper No. 14054.
10. Committee on the Global Financial System (CGFS), 2008. Central bank operations in response to the turmoil. CGFS Working Paper No. 31.
11. Covrig V., Low B.S., and Melvin M. A yen is not a yen: TIBOR/LIBOR and the determinants of the Japan premium. Journal of Financial and Quantitative Analysis 39 (2004) 193-208
12. Darvas Z. Leveraged carry trade portfolios. Journal of Banking and Finance 33 (2009) 944-957
13. Dudley, W., 2008. May you live in interesting times: The Sequel. In: Remarks at the Federal Reserve Bank of Chicago's 44th Annual Conference on Bank Structure and Competition on May 15.
14. Duffie D., and Huang M. Swap rates and credit quality. Journal of Finance 51 (1996) 921-950
15. European Central Bank (ECB), 2007. Financial Stability Review December.
16. Federal Reserve Bank of New York (FRBNY), 2007. Treasury and Federal Reserve Exchange Operations: July-September.
17. Gyntelberg J., and Wooldridge P. Interbank rate fixings during the recent turmoil. BIS Quarterly Review (2008) 59-72
18. Hanajiri, T., 1999. Three Japan premiums in autumn 1997: Why did premiums differ between markets? Financial Market Working Paper No. 99-E-1, Bank of Japan.
19. International Monetary Fund (IMF), 2008. Market and funding illiquidity: When private risk becomes public. Global Financial Stability Report April, pp. 86-117.
20. Kotomin V., Smith S.D., and Winters D.B. Preferred habitat for liquidity in international short-term interest rates. Journal of Banking and Finance 32 (2008) 240-250
21. McAndews, J., Sarkar, A., Wang, Z., 2008. The effects of the term auction facility on the London interbank offered rate. Staff Report No. 335, Federal Reserve Bank of New York.
22. McGuire P., and von Peter G. International banking activity amidst the turmoil. BIS Quarterly Review (2008) 31-43
23. Michaud F.-L., and Upper C. What drives interbank rates? Evidence from the Libor panel. BIS Quarterly Review (2008) 47-58
24. Nautz D., and Schmidt S. Monetary policy implementation and the federal funds rate. Journal of Banking and Finance 33 (2009) 1274-1284
25. Nelson B. Conditional heteroskedasticity in asset returns: A new approach. Econometrica 59 (1991) 347-370
26. Peek J., and Rosengren E.S. Determinants of the Japan premium: Action speak louder than words. Journal of International Economics 53 (2001) 283-305
27. Taylor M. Covered interest arbitrage and market turbulence. Economic Journal 99 (1989) 376-391
28. Taylor J.B., and Williams J.C. A black swan in the money market. American Economic Journal: Macroeconomic 1 (2009) 58-83