Mapping Change in the Federal Funds Market
Morten L. Bech
Federal Reserve Bank of New York
Carl T. Bergstrom
University of Washington
affiliation not provided to SSRN
Umea University Deptartment of Physics
FRB of New York Staff Report No. 507
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, E51working papers series
Date posted: August 26, 2011
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