Interbank

The aim of this thesis is to evaluate the conduct of macroprudential policies in an heterogenous monetary union, such as the Eurozone, by borrowing on the very recent theoretical and empirical developments of Dynamic Stochastic General Equilibrium (DSGE) models and Bayesian econometrics. We account for two main patterns of the Eurosystem: the business cycles divergence between core and peripheral countries and the globalization of banking and its spillovers when implementing macroprudential policies. As a main result, the implementation of macroprudential policy measures improves welfare at the global level. The highest welfare gains are observed when countries use multiple instruments and when macroprudential policy is implemented in a granular fashion. However, the conduct of macroprudential policy is not a free lunch for participating countries: in most situations, peripheral countries are winners while core countries record either smaller welfare gains or even welfare losses. In many policy experiments, we find that there exists an equilibrium that combines welfare increases at both the global and national levels for all participants but its enforceability requires a federal action, thus justifying the existence of a coordination mechanism such as the ESRB in the Eurozone. Finally, the possibility of banks to engage in cross border lending introduces an important spillover channel that tends to increase the welfare gains associated to macroprudential measures. Ignoring this phenomenon may lead to fallacious results in terms of the welfare ranking of alternative implementation schemes.

The adoption or acceptance of any digital currency has to lie on its usability, convenience and flexibility. This acceptance must involve not only the end-users but also the retailers and all commercial centres, including financial institutions and payment gateways. The wider practical adoption or acceptance of digital currencies, besides CBDCs, at the commercial level will likely take place when there is a better understanding of how the price discovery of different cryptocurrencies translate to better predictability and acceptance, despite its attendant volatilities. Such in-depth understanding will be crucial to develop hedging and diversification strategies for financial management in the investment portfolios or treasury operations of the future.

This paper seeks to evaluate quantitatively how interbank and corporate crossborder flows shape business cycles in a monetary union. Using Bayesian techniques, we estimate a two-country DSGE model that distinguishes between Eurozone core and peripheral countries and accounts for national heterogeneities and a set of real, nominal and financial frictions. We find evidence of the key role of this
cross-border channel as an amplifying mechanism in the diffusion of asymmetric shocks. Our model also reveals that under banking globalization, most national variables and the central bank interest rate are less sensitive to financial shocks while investment and current account imbalances are more sensitive to financial shocks. Finally, a counterfactual analysis shows that cross-border lending has
affected the transmission of the recent financial crisis between the two groups of countries.

We develop a two-country model with an explicitly microfounded interbank market and sovereign default risk. Calibrated to the Euro Area, the model performs satis- factorily in matching key business cycle facts on real, financial and fiscal time series. We then use the model to assess the effects of a large crisis and quantify the poten- tial effects of alternative unconventional policies on the dynamics of GDP, sovereign default risk and public indebtedness. We show that quantitative monetary easing is more efficient in stimulating GDP, while qualitative monetary easing relieves finan- cial tensions and sovereign risk more efficiently. In terms of welfare, in the short run, unconventional monetary policies bring sizable welfare gains for households, while the long term effects are much smaller.

The paper analyzes liquidity risk and contagion in interbank markets. The
aim of the research is to define the different structures of interbank
markets and structures that allow the better allocation of liquidity and
thus avoid the spread of crisis in the whole system. For this purpose, this
paper examines Allen and Gale model. This model is the pioneer model
in the management of liquidity risk in the interbank market. We will then
analyze the mechanisms that explain the spread of liquidity risk in the
banking system both at national and international level.

This paper seeks to explore nexus between the volatility in the Kenyan interbank market and Treasury bill market in the event of market distress arising from collapses of a lender. Three stress triggering events are defined;-the placement of Dubai Bank, Imperial Bank and Chase Bank placement under receivership. The inclusion of Treasury bill market is aimed to ascertaining whether then Central Bank's intervention in the market to correct inefficiency in the interbank market upon the collapse of a lender is either proactive or reactive. The EGARCH and TGARCH were used to model the relationship. Key finding of the study is that 91-Day Treasury bill rate positively and significantly affects the interbank market rate with the effect doubling in the wake of bank collapse.

This paper seeks to explore nexus between the volatility in the Kenyan interbank market and Treasury bill market in the event of market distress arising from collapses of a lender. Three stress triggering events are defined; -the placement of Dubai Bank, Imperial Bank and Chase Bank placement under receivership. The inclusion of Treasury bill market is aimed to ascertaining whether then Central Bank’s intervention in the market to correct inefficiency in the interbank market upon the collapse of a lender is either proactive or reactive. The EGARCH and TGARCH were used to model the relationship. Key finding of the study is that 91-Day Treasury bill rate positively and significantly affects the interbank market rate with the effect doubling in the wake of bank collapse.