Trade Dynamics in the Market for Federal Funds
We develop a search model of the federal funds market and show that, at each point along the trading session, rates are increasing in the penalty for reserve deficiencies, decreasing in the borrower's bargaining power, and when there are more (less) lenders than borrowers, also decreasing (increasing) in the frequency of meetings. We also study the conditions that shape the time path of the fed funds rate throughout a trading session, and identify the factors that can cause rates to rise or to fall with the time remaining until the end of the trading day.
Year of publication: |
2010
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Authors: | Lagos, Ricardo ; Afonso, Gara |
Institutions: | Society for Economic Dynamics - SED |
Saved in:
freely available
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