The Topology of the Federal Funds Market
39 Pages Posted: 2 Feb 2009
Date Written: December 30, 2008
We explore the network topology of the federal funds market. This market is important for distributing liquidity throughout the financial system and for the implementation of monetary policy. The recent turmoil in global financial markets underscores its importance. We find that the network is sparse, exhibits the small world phenomenon and is disassortative. Reciprocity tracks the federal funds rate and centrality measures are useful predictors of the interest rate of a loan.
Keywords: network, topology, interbank, money market
JEL Classification: E4, E58, E59, G1
Suggested Citation: Suggested Citation