An Empirical Study of Trade Dynamics in the Fed Funds Market

40 Pages Posted: 25 Feb 2012

See all articles by Gara Afonso

Gara Afonso

Federal Reserve Bank of New York

Ricardo Lagos

New York University (NYU) - Department of Economics

Date Written: February 1, 2012

Abstract

We use minute-by-minute daily transaction-level payments data to document the cross-sectional and time-series behavior of the estimated prices and quantities negotiated by commercial banks in the fed funds market. We study the frequency and volume of trade, the size distribution of loans, the distribution of bilateral fed funds rates, and the intraday dynamics of the reserve balances held by commercial banks. We find evidence of the importance of the liquidity provision achieved by commercial banks that act as de facto intermediaries of fed funds.

Keywords: monetary policy, Fed funds market, Fed funds rate

JEL Classification: E42, E44, G21

Suggested Citation

Afonso, Gara and Lagos, Ricardo, An Empirical Study of Trade Dynamics in the Fed Funds Market (February 1, 2012). FRB of New York Staff Report No. 550. Available at SSRN: https://ssrn.com/abstract=2010636 or http://dx.doi.org/10.2139/ssrn.2010636

Gara Afonso (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

HOME PAGE: http://nyfedeconomists.org/afonso

Ricardo Lagos

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-998-8937 (Phone)

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