EconPapers    
Economics at your fingertips  
 

The federal funds network and monetary policy transmission: Evidence from the 2007–2009 financial crisis

Daniel Beltran (), Valentin Bolotnyy () and Elizabeth Klee

Journal of Monetary Economics, 2021, vol. 117, issue C, 187-202

Abstract: Using a network approach, we show how the federal funds market was transformed during the financial crisis through the collapse of the ABCP market in 2007, changes in monetary policy implementation, and an increase in counterparty credit risk. For both aggregate and bank-level network metrics, we find that increases in counterparty and liquidity risk are associated with reduced lending activity within the network. We also provide evidence that network peer effects are strong and influence banks’ holdings of reserve balances and rates paid in the federal funds market. Finally, we document how these changes to the network structure dampened the transmission of monetary policy.

Keywords: Networks; Fedwire; Federal funds; Interbank lending (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393219302193
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:117:y:2021:i:c:p:187-202

DOI: 10.1016/j.jmoneco.2019.12.006

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2023-01-23
Handle: RePEc:eee:moneco:v:117:y:2021:i:c:p:187-202