Cheap Talk and Strategic Rounding in LIBOR Submissions

• 成果类型: Article
• 署名作者: Hernando-Veciana, Angel; Troge, Michael
• 署名单位: Durham University; heSam Universite; ESCP Business School
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhz101
• 发表日期: 2020
• 页码: 2585
• 关键词: FUNDS MARKET; selection

摘要

Interbanking rates were, until recently, based on judgmental estimates of borrowing costs. We interpret this as a cheap-talk game that allowed banks to communicate nonverifiable information about their opportunity cost to potential counterparties. Under normal market conditions there is a welfare maximizing equilibrium where banks truthfully disclose their borrowing cost, but, in times of financial stress, only coarse equilibria survive. We take this prediction to the data and show that banks round more frequently if the risk of the bank increases. Rounding is also more frequent for the more liquid short-term rates and certain benchmark maturities.