The effect of the Term Auction Facility on the London Inter-Bank Offered Rate

James Joseph McAndrews (), Asani Sarkar and Zhenyu Wang

No 335, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper examines the effects of the Federal Reserve's Term Auction Facility (TAF) on the London Inter-Bank Offered Rate (LIBOR). The particular question investigated is whether the announcements and operations of the TAF are associated with downward shifts of the LIBOR; such an association would provide one indication of the efficacy of the TAF in mitigating liquidity problems in the interbank funding market. The empirical results suggest that the TAF has helped to ease strains in this market.

Keywords: Federal Reserve System; Interbank market; Financial markets; Bank liquidity (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
Date: Written 2008
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