Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System

Haelim Anderson, Charles W. Calomiris, Matthew Jaremski and Gary Richardson

Journal of Money, Credit and Banking, 2018, vol. 50, issue 1, 173-201

Abstract: Reducing systemic liquidity risk related to seasonal loan demand was one reason for founding the Federal Reserve System. Nevertheless, less than 8% of state‐chartered banks joined the Fed in its first decade. Banks facing high liquidity risk from seasonal loan demand were more likely to join the Fed in its first decade. We also find evidence consistent with the notion that banks could obtain some indirect access to the discount window through interbank transfers. Some banks apparently joined the Fed to pass through discount window liquidity to other banks via the interbank network. Joining the Fed increased member banks’ lending.

Date: 2018
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https://doi.org/10.1111/jmcb.12457

Related works:
Working Paper: Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System (2016)
Working Paper: Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System (2015)
Working Paper: Liquidity Risk, Bank Networks, and the Value of Joining the Federal Reserve System (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:50:y:2018:i:1:p:173-201

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