Measuring stress in money markets: A dynamic factor approach

Seth Carpenter, Selva Demiralp, Bernd Schlusche and Zeynep Senyuz

Economics Letters, 2014, vol. 125, issue 1, 101-106

Abstract: We extract an index of interest rate spreads from various money market segments to assess the level of funding stress in real time. We find that during the 2007–2009 financial crisis, money markets switched between low and high stress regimes except for brief periods of extreme stress. Transitions to lower stress regimes are typically associated with the non-standard policy measures by the Federal Reserve.

Keywords: Money market; Dynamic factor models; Markov-switching; Financial crisis (search for similar items in EconPapers)
JEL-codes: C32 E44 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:125:y:2014:i:1:p:101-106

DOI: 10.1016/j.econlet.2014.08.017

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