Financial Markets and Portfolio Management

, Volume 29, Issue 3, pp 207–250 | Cite as

Drivers of demand and supply in the Euro interbank market: the role of “Key Players” during the recent turmoil

  • Caterina Liberati
  • Massimiliano Marzo
  • Paolo ZagagliaEmail author
  • Paola Zappa


We study frictions in trading patterns in the Euro money market. We characterize the structure of lending relations during the period of recent financial turmoil. We use a network-topology method on data from overnight transactions in the Electronic Market for Interbank Deposits (e-MID) to investigate two main issues. First, we characterize the roles of borrowers and lenders in long-run relationships by providing evidence on network formation at a 3-month frequency. Second, we identify the “key players” in the marketplace and study their behavior. In our formalization, key players are “locally-central banks” within a network that lend (or borrow) large volumes to (from) several counterparties, while borrowing (or lending) small volumes from (to) a small number of institutions. Our results are twofold. We show that the aggregate trading patterns in e-MID are characterized by largely asymmetric relations. This implies a clear difference in the roles of lenders and borrowers, with market positions changing only gradually over time. We also find that the large net lenders exploit their positions as network leaders by imposing aggressive pricing policies on their counterparties.


Market microstructure Network analysis Money markets Money supply 

JEL Classification

D85 G01 G10 G21 



The authors acknowledge helpful comments from seminar participants at the Bank of Finland. They are also very grateful to Stefano Nardelli and to an anonymous referee for very insightful suggestions that led to major improvements of the paper. Tatjana Berg provided very valuable editorial assistance. Marzo and Zagaglia received financial support through a PRIN Grant by the Ministry of Education and Research at the University of Bologna.


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Copyright information

© Swiss Society for Financial Market Research 2015

Authors and Affiliations

  • Caterina Liberati
    • 1
  • Massimiliano Marzo
    • 2
  • Paolo Zagaglia
    • 3
    Email author
  • Paola Zappa
    • 4
  1. 1.Department of Economics, Statistics and ManagementUniversità degli Studi Milano-BicoccaMilanItaly
  2. 2.Department of EconomicsUniversità di BolognaBolognaItaly
  3. 3.Department of Cultural Goods (Ravenna Campus), Intentac, Rimini Centre for Economic AnalysisUniversità di BolognaBolognaItaly
  4. 4.Faculty of EconomicsUniversity of Italian SwitzerlandLuganoSwitzerland

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