Trade Dynamics in the Market for Federal Funds

Gara Afonso and Ricardo Lagos

No 20419, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 normative questions: What are the determinants of the fed funds rate? How does the market reallocate funds? Is the market able to achieve an efficient reallocation of funds? We also use the model for theoretical and quantitative analyses of policy issues facing modern central banks.

JEL-codes: E4 E43 E5 E52 E58 G21 G28 (search for similar items in EconPapers)
Date: 2014-08
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-mon
Note: AP ME
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Citations: View citations in EconPapers (42)

Published as Gara Afonso & Ricardo Lagos, 2015. "Trade Dynamics in the Market for Federal Funds," Econometrica, Econometric Society, vol. 83, pages 263-313, 01.

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Related works:
Working Paper: Trade Dynamics in the Market for Federal Funds (2014)
Working Paper: Trade dynamics in the market for federal funds (2012)
Working Paper: Trade Dynamics in the Market for Federal Funds (2011)
Working Paper: Trade Dynamics in the Market for Federal Funds (2010)
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