Payment transfers measure the pulse of the financial markets

Abstract

The euro led to the integration of the money markets, enabling banks to flexibly obtain liquidity from each other across borders. During the crisis, however, interbank money markets have faded. Cross-border payments between Finnish and debt-crisis country banks have diminished. Besides balance sheet data, payment transactions provide an interesting channel for monitoring activity in the money markets and in the broader economy, too. Changes in the volumes and values of payment transactions between the parties involved are rapidly visible and may give early signs of changing patterns in behaviour. Payment transfers are actually a kind of measure of the pulse of the markets if unforeseen changes occur in the pulse, the causes for such volatility deserve closer scrutiny.