The Topology of the Federal Funds Market
32 Pages Posted: 12 Nov 2008
Date Written: November 2008
The recent turmoil in global financial markets underscores the importance of the federal funds market as a means of distributing liquidity throughout the financial system and a tool for implementing monetary policy. In this paper, we explore the network topology of the federal funds market. We find that the network is sparse, exhibits the small-world phenomenon, and is disassortative. In addition, reciprocity loans track the federal funds rate, and centrality measures are useful predictors of the interest rate of a loan.
Keywords: federal funds, network, topology, interbank, money markets
JEL Classification: E40, E58, E59, G10
Suggested Citation: Suggested Citation