We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they meet, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive and...

Over the past twenty years, especially the past decade, China has taken enormous strides to develop its bond market as an integral step of financial reform. This paper aims to provide the most up-to-date overview of Chinese bond markets, by highlighting two distinct and largely segmented...

This study investigates the stability of long-run log-linear demand functions for narrowly defined monetary aggregates (M1, Monetary Base) in the U.S. during the post World War II period. The hypotheses that the individual time series which appear in such equations (real M1, real Monetary Base,...

In the United States today, the system of financial regulation is complex and fragmented. Responsibility to regulate the financial services industry is split between about a dozen federal agencies, hundreds of state agencies, and numerous industry-sponsored self-governing associations....

A firm's termination generates bankruptcy costs. This may create incentives for a firm's owner to bail out a firm in bankruptcy and to curb the firm's risk taking outside bankruptcy. We analyze the role of such implicit guarantees in the context of financial institutions that sponsor money...

The model proposed by Merton(1981) to determine the value of forecasting ability is adapted to investigate whether money market fund managers successfully anticipate changes in the yield curve by adjusting the average maturity of their portfolios in the right direction. The potential economic...

In this paper, we examine the pricing determinants in the systemically important tri-party repo market. Taking advantage of the recently available N-MFP reports filed by money market funds, we construct a novel dataset that contains tri-party repo transactions between money market funds and...

Interbank money markets have been subject to substantial impairments in the recent decade, such as a decline in unsecured lending and substantial increases in haircuts on posted collateral. This paper seeks to understand the implications of these developments for the broader economy and monetary...

In an effort to shed new light on the monetary transmission mechanism, we create a panel data set that includes quarterly observations of every insured commercial bank in the United States over the period 1976-1993. Our key cross-sectional finding is that the impact of monetary policy on lending...

First, we show that the interest rate on Federal funds is extremely informative about future movements of real macroeconomic variables, more so than monetary aggregates or other interest rates. Next, we argue that the reason for this forecasting is that the funds rate sensitively records shocks...