LIBOR: Origins, Economics, Crisis, Scandal, and Reform
2014 Number 667
JEL classification: G01,G12,G15,G18
David Hou and
The London Interbank Offered Rate (LIBOR) is a widely used indicator of funding conditions in the interbank market. As of 2013, LIBOR underpins more than $300 trillion of financial contracts, including swaps and futures, in addition to trillions more in variable-rate mortgage and student loans. LIBOR's volatile behavior during the financial crisis provoked questions surrounding its credibility. Ongoing regulatory investigations have uncovered misconduct by a number of financial institutions. Policymakers across the globe now face the task of reforming LIBOR in the aftermath of the scandal and crisis.
For a published version of this report, see David Hou and David Skeie, "LIBOR: Origins, Economics, Crisis, Scandal, and Reform," The New Palgrave Dictionary of Economics. Online Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2013.