Search Results
Journal Article
A New Daily Federal Funds Rate Series and History of the Federal Funds Market, 1928-54
This article describes the origins and development of the federal funds market from its inception in the 1920s to the early 1950s. We present a newly digitized daily data series on the federal funds rate from April 1928 through June 1954. We compare the behavior of the funds rate with other money market interest rates and the Federal Reserve discount rate. Our federal funds rate series will enhance the ability of researchers to study an eventful period in U.S. financial history and better understand how monetary policy was transmitted to banking and financial markets. For the 1920s-30s, our ...
Working Paper
Beyond Reserves: The Federal Reserve's Balance Sheet and the Repo Market
We present a new constraint on the size of the Fed’s balance sheet: repo market capacity. Calibrating a structural model to the recent monetary tightening cycle, we show that repo market capacity—driven by money market fund liquidity supply—is the binding constraint on the Fed’s balance sheet, not bank reserve demand, which was highlighted in the events of September 2019. We also demonstrate a novel complementarity between interest rate and balance sheet policies: higher policy rates expand repo capacity, allowing the central bank to operate with a smaller balance sheet.
Discussion Paper
The Re-emergence of the Federal Reserve Funds Market in the 1950s
In this note, we highlight the re-emergence of the federal funds market in the 1950s.
Working Paper
The Regulatory and Monetary Policy Nexus in the Repo Market
We examine the interaction of regulatory reforms and changes in monetary policy in the U.S. repo market. Using a proprietary data set of repo transactions, we find that differences in regional implementation of Basel III capital reforms intensified European dealers' window-dressing by 80%. Money funds eligible to use the Fed's reverse repo (RRP) facility cut their private lending almost by half and instead lent to the Fed when European dealers withdraw, contributing to smooth implementation of Basel III. In a difference-in-differences setting, we show that ineligible funds lent 15% less to ...
Working Paper
A Tale of Demand and Supply for Central Bank Reserves
In an ample-reserves framework, administered rates anchor money markets but suppress information from unsecured interbank trading. We recover that information by isolating the small interbank segment of the federal funds market. Using high-frequency bank-level data, we employ deposit shocks as an instrument for bank borrowing demand. Our analysis reveals that non-bank lenders, such as Federal Home Loan Banks, supply funds elastically, whereas bank lenders exhibit price inelasticity, which intensifies as their reserve balances decline, particularly for bankers’ banks. This interbank segment ...
Discussion Paper
Repo Markets and the Fed's Balance Sheet: Implications for Monetary Policy Implementation
As the Federal Reserve (Fed) navigates periods of balance sheet expansion and reduction, it has become increasingly important to understand how changes in the size and composition of Fed assets affect short-term funding markets. The overnight Treasury repo market is central to this relationship since it is a transmission channel through which balance sheet policy can affect money market conditions and, ultimately, the Fed's policy rate, the effective federal funds rate (EFFR).
Working Paper
Managing Stigma during a Financial Crisis
How should regulators design effective emergency lending facilities to mitigate stigma during a financial crisis? I explore this question using data from an unexpected disclosure of partial lists of banks that secretly borrowed from the lender of last resort during the Great Depression. I find evidence of stigma in that depositors withdrew more deposits from banks included on the lists in comparison with banks left off the lists. However, stigma dissipated for banks that were revealed earlier after subsequent banks were revealed. Overall, the results suggest that an emergency lending facility ...
Working Paper
A New Daily Federal Funds Rate Series and History of the Federal Funds Market, 1928-1954
This article describes the origins and development of the federal funds market from its inception in the 1920s to the early 1950s. We present a newly digitized daily data series on the federal funds rate from April 1928 through June 1954. We compare the behavior of the funds rate with other money market interest rates and the Federal Reserve discount rate. Our federal funds rate series will enhance the ability of researchers to study an eventful period in U.S. financial history and to better understand how monetary policy was transmitted to banking and financial markets. For the 1920s and ...
Working Paper
A New Daily Federal Funds Rate Series and History of the Federal Funds Market, 1928-1954
This article describes the origins and development of the federal funds market from its inception in the 1920s to the early 1950s. We present a newly digitized daily data series on the federal funds rate that covers the period from April 1928 through June 1954. We compare the behavior of the funds rate with other money market interest rates and the Federal Reserve discount rate. Our federal funds rate series will enhance the ability of researchers to study an eventful period in U.S. financial history and to better understand how monetary policy was transmitted to banking and financial ...