Money Market Integration

Leonardo Bartolini, Spence Hilton and Alessandro Prati

Journal of Money, Credit and Banking, 2008, vol. 40, issue 1, pages 193-213

Abstract: We use transaction-level data and detailed modeling of the high-frequency behavior of federal funds-Eurodollar spreads to provide evidence of strong integration of the U.S. markets for federal funds and Eurodollars, the two core components of the dollar money market. Our evidence of negligible federal funds-Eurodollar premia contrasts with previous findings of large and predictable premia, which have been interpreted as evidence of segmentation "between" the markets for federal funds and Eurodollars. Our results, however, are consistent with possible persistent segmentation "within" the global Eurodollar market. We document several patterns in the behavior of federal funds-Eurodollar spreads, including liquidity effects from trading volume to yield spreads' volatility. Copyright 2008 The Ohio State University.

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Related works:
Working Paper: Money Market Integration (2006)
Working Paper: Money market integration (2005)
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