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Article

Market Discipline in the Interbank Market: Evidence from Russia

Eastern European Economics. 2015. Vol. 53. No. 2. P. 69-98.
Semenova M., Andrievskaya I. K.

The efficiency of the interbank market depends largely on its inherent disciplining mechanisms. This paper investigates the discipline mechanisms of Russia’s interbank market, testing the hypothesis that market discipline in Russia was strong enough to constrain excessive risk-taking by participating banks before, during, and after the 2008–2009 financial crisis. The existence and efficiency of quantity-based market discipline are investigated using the Arellano-Bover and Blundell-Bond linear dynamic panel-data estimations. Our approach detects market discipline only during the financial crisis, not before or after. Even during the crisis, the efficiency of market discipline in curbing bank risk-taking was rather low.