March 2016 issue contents
How to measure the unsecured money market: the Eurosystem's implementation and validation using TARGET2 data

by Luca Arcieroa, Ronald Heijmansb, Richard Heuverb, Marco Massarentic, Cristina Picilloa and Francesco Vacircaa


This paper develops a methodology, based on Furfine (1999), to identify unsecured interbank money-market loans from transaction data of the most important euro processing payment system, TARGET2, for maturity ranging from one day (overnight) up to one year. The implementation has been verified with (i) interbank money-market transactions executed on the Italian trading platform e-MID and (ii) individual reporting by the EONIA panel banks. The type 2 (false negative) error for the best performing algorithm setup is equal to 0.92 percent. The different stages of the global financial crisis and of the sovereign debt crises are clearly visible in the interbank money market, characterized by significant drops in the turnover. We find aggregated interest rates very close to EONIA but we observe high heterogeneity across countries and market participants.

JEL Codes: E42, E44, E58, G01.

Full article (PDF, 34 pages, 3003 kb)

a Banca d'Italia 
b De Nederlandsche Bank 
a European Central Bank