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Jon Håkon Findreng
Former Member
Title
Ph.D
Last Name
Findreng
First name
Jon Håkon
Phone
+41 71 224 7040
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Item type:Publication, Essays on the Interbank MarketBilateral payment flows between banks may provide private information about a borrowing bank's liquidity position. Peer Monitoring vs. Search Costs in the Interbank Market, analyses whether private information on the bilateral payment flow of central bank reserves foster peer monitoring or whether the information is used to reduce search costs in the unsecured interbank market. In the former, banks with outflows of liquidity are penalized by their counterparties, while in the latter, these banks benefit through reduced search costs to find a liquidity provider. Using transaction level data from Norges Bank, I find results suggestive of banks using private information from payment flows to reduce search costs and not for peer monitoring. In October 2011, to encourage interbank trading, Norges Bank set quotas for banks' overnight reserves with remuneration at the policy rate, while remuneration on excess reserves was set one percentage point lower. In addition, total liquidity in the system was substantially reduced and targeted within a narrow range. In Norwegian interbank markets response to changes in liquidity policy, we document a significant increase in interbank activity and a fall in interest rates following the policy shift. In another policy paper, The central bank as the central counterparty, we analyse Norges Bank's response to the Covid-19 pandemic. Long-term loan auctions and daily deposit auctions were offered simultaneously enabling banks to costlessly hoard large quantities of reserves and deposit them safely overnight. We find that these market interventions had a deteriorating effect on traded volumes in the unsecured overnight interbank market. However, the interventions had a dampening effect on the banks' holdings of excess reserves such that reserves were distributed more evenly across banks.Type:doctoral thesis