The SOFR and the Fed’s influence over market interest rates

Ivan Indriawan, Feng Jiao and Yiuman Tse

Economics Letters, 2021, vol. 209, issue C

Abstract: The secured overnight financing rate (SOFR) is the successor to LIBOR (London interbank offered rate) as a benchmark rate for lending in US dollars. Our results show that the SOFR aligns with the Federal Reserve’s policy target more closely than LIBOR. In addition, short-term market rates are more responsive to the SOFR than to LIBOR. Our findings highlight the advantages of the new benchmark rate over its predecessor.

Keywords: LIBOR; SOFR; Target fed funds rate (search for similar items in EconPapers)
JEL-codes: E43 E58 G12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:209:y:2021:i:c:s0165176521003724

DOI: 10.1016/j.econlet.2021.110095

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