Working Paper
The costs and benefits of moral suasion: evidence from the rescue of Long-Term Capital Management
Furfine, Craig H. (2002)
This study examines the level of unsecured borrowing done by the firms that would ultimately rescue Long-Term Capital Management in the days leading up to the hedge fund's rescue. Although there is some evidence that these banks borrowed less at the height of the crisis, further examination reveals that this reduction in borrowing was demand-driven and did not result from rationing on the part of the market. This suggests that the market believed that the troubles at LTCM would not have solvency-threatening repercussions for the fund's major creditors. Further, it is shown that large banks ...
Working Paper Series , Paper WP-02-11

Working Paper
Analyzing alternative intraday credit policies in real-time gross settlement systems
Stehm, Jeff; Furfine, Craig H. (1997)
This paper examines a central bank's choice of intraday credit policy for Real-Time Gross Settlement (RTGS) systems. Formal analysis of central bank objectives and commercial bank payment activity provides insight into both the choice and effects of several possible intraday credit policies. Observed intraday credit policies are interpreted within the context of the model. Among G-10 central banks, different combinations of prices, collateral, and quantity limits have been chosen to manage the supply of intraday credit. Conditions that rationalize these choices are shown to rely on a) central ...
Finance and Economics Discussion Series , Paper 1997-40

Journal Article
Decimalization and market liquidity
Furfine, Craig H. (2003-10)
This study examines the stocks of 1, 339 companies that began decimal trading on the NYSE on January 29, 2001. Using the price impact of a trade as a measure of liquidity, the author finds that decimalization typically led to an improvement in liquidity.
Economic Perspectives , Volume 27 , Issue Q IV

Working Paper
Price discovery in a market under stress: the U.S. Treasury market in fall 1998
Remolona, Eli M.; Furfine, Craig H. (2005)
We analyze how price discovery in the inter- dealer market for U.S. Treasury securities differs between stressful times and normal periods. Using tick-by-tick data on inter-dealer transactions in the on-the- run two-year, five-year and 10-year Treasury notes, we find that the impact of trades on prices tends to become significantly stronger on stressful days. This effect remains after accounting for the faster trading, wider spreads, and shallower depth observed on stressful days
Working Paper Series , Paper WP-05-06

Conference Paper
The costs and benefits of moral suasion: evidence from the rescue of long-term capital management
Furfine, Craig H. (2001)
Proceedings , Paper 725

Newsletter
Discount window borrowing: understanding recent experience
Furfine, Craig H. (2005-03)
By changing how it operates the discount window, the Fed aims to provide banks with a less burdensome source of short-term funding and to encourage commercial banks to occasionally use the Fed as a source of short-term funds.
Chicago Fed Letter , Issue Mar

Conference Paper
Interbank exposures: quantifying the risk of contagion
Furfine, Craig H. (1999)
Proceedings , Paper 633

Working Paper
Interbank payments and the daily federal funds rate
Furfine, Craig H. (1998)
This paper develops a model of bank reserve management and federal funds rate determination that incorporates the role of interbank payments. In the model, uncertainty in the receipt of payments generates a precautionary demand for bank reserves as banks face both reserve requirements and penalties for overnight overdrafts. Days with higher payment volume are assumed to create more uncertainty in a bank's reserve account that accentuates this precautionary motive. As a result, upward pressure is placed on the equilibrium funds rate. Implications of the model are then estimated using a panel ...
Finance and Economics Discussion Series , Paper 1998-31

Working Paper
Standing facilities and interbank borrowing: evidence from the Federal Reserve’s new discount window
Furfine, Craig H. (2004)
Standing facilities are designed to place an upper bound on the rates at which financial institutions lend to one another overnight, reducing the volatility of the overnight interest rate, typically the rate targeted by central banks. However, improper design of the facility might decrease a bank?s incentive to participate actively in the interbank market. Thus, the mere availability of central bank provided credit may lead to its use being more than what would be expected based on the characteristics of the interbank market. ; By contrast, however, banks may perceive a stigma from using such ...
Working Paper Series , Paper WP-04-01

Conference Paper
Empirical evidence on the need for a lender of last resort
Furfine, Craig H. (2000)
Proceedings , Paper 674