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Trade dynamics in the market for federal funds

Author

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  • Gara M. dup Afonso
  • Ricardo Lagos

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 interbank market. We study the frequency and volume of trade, the size distribution of loans, the distribution of bilateral 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 funds.

Suggested Citation

  • Gara M. dup Afonso & Ricardo Lagos, 2012. "Trade dynamics in the market for federal funds," Staff Reports 549, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:549
    Note: For a published version of this report, see Gara Afonso and Ricardo Lagos, "Trade Dynamics in the Market for Federal Funds," Econometrica 83, no. 1 (January 2015): 263-313.
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    More about this item

    Keywords

    over-the-counter; fed funds market; search; bargaining;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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