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Mapping Change in the Federal Funds MarketMorten L. BechFederal Reserve Bank of New York Carl T. BergstromUniversity of Washington Rodney Garrattaffiliation not provided to SSRN Martin RosvallUmea University Deptartment of Physics August 2011 FRB of New York Staff Report No. 507 Abstract: We use an information-theoretic approach to describe changes in lending relationships between federal funds market participants around the time of the Lehman Brothers failure. Unlike previous work that conducts maximum-likelihood estimation on undirected networks, our analysis distinguishes between borrowers and lenders and looks for broader lending relationships (multibank lending cycles) that extend beyond the immediate counterparties. We find that significant changes in lending patterns emerge following implementation of the Interest on Reserves policy by the Federal Reserve on October 9, 2008.
Number of Pages in PDF File: 14 Keywords: federal funds market, lending, payment, networks, clustering, map equation JEL Classification: E42, E51 working papers seriesDate posted: August 26, 2011Suggested CitationContact Information
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