Our website will undergo scheduled maintenance on the morning of Thursday, August 11, 2022. During this time, connection to our website and some of its features may be unavailable. Thank you for your patience and we apologize for any inconvenience.

Working Paper

The Over-the-Counter Theory of the Fed Funds Market: A Primer

Abstract: We present a dynamic over-the-counter model of the fed funds market and use it to study the determination of the fed funds rate, the volume of loans traded, and the intraday evolution of the distribution of reserve balances across banks. We also investigate the implications of changes in the market structure, as well as the effects of central bank policy instruments such as open market operations, the discount window lending rate, and the interest rate on bank reserves.

Keywords: Fed funds market; Search; Bargaining; Over-the-counter market;

JEL Classification: C78; D83; E44; G10;

Access Documents

File(s): File format is application/pdf http://www.minneapolisfed.org/research/wp/wp711.pdf
Description: Full text


Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Working Papers

Publication Date: 2014-04-18

Number: 711

Pages: 75 pages