Risk of liquidity and contagion of the crisis on the United States, United Kingdom and euro zone money markets
Year: 2011
Type: article
Abstract: ABSTRACT The financial crisis has produced a generalized rise of the liquidity risk on the money markets. The purpose of this article is to highlight the mechanisms of contagion between the money markets of the United States, the United Kingdom and the Euro Zone. To give an account of these mechanisms, a BEKK model, in which we introduce a structural break, is adopted. Thus, this model explicitly tests the spillover effects of the liquidity risk premium on money markets. The results show that before the financial crisis (i.e. the reference period), there is a recursive propagation process between the Euro€ and the BP£ zones, a propagation process between the BP£ and the US$ areas and an obvious spread of volatilities from the EU€ zone towards the US$ zone;. During the crisis period, the liquidity problems start from the US money market to the UK£ and EU€ money markets. Copyright © 2011 John Wiley & Sons, Ltd.
DOI: 10.1002/ijfe.445
Institutions: Centre National de la Recherche Scientifique, Groupe de Recherche en Économie Théorique et Appliquée, Université Montesquieu Bordeaux IV, Sorbonne Université, Centre d'Économie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, Laboratoire d'Analyse et de Prospective Economiques, Université de Limoges
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2057794664