This chapter provides an overview of the federal funds market and how the equilibrium federal fund rate is determined. I devote particular attention to comparing and contrasting the federal funds market before and after 2008, since there were several dramatic changes around that time that...

We study the liquidity demand of large settlement banks in the UK and its effect on the Sterling Money Markets before and during the sub-prime crisis of 2007-08. Liquidity holdings of large settlement banks experienced on average a 30% increase in the period immediately following 9th August,...

This paper examines the impact of the financial crisis of 2008 on the federal funds market, specifically the bankruptcy of Lehman Brothers. Rather than a complete collapse of lending in the presence of a market wide shock, we see that banks become more restrictive in which counterparties they...

At the center of the financial market crisis of 2007-2008 was a highly unusual jump in spreads between the overnight inter-bank lending rate and term London inter-bank offer rates (Libor). Because many private loans are linked to Libor rates, the sharp increase in these spreads raised the cost...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 U.S. financial crisis? Once...

Under the classical gold standard (1880-1914), the Bank of France maintained a stable discount rate while the Bank of England changed its rate very frequently. Why did the policies of these central banks, the two pillars of the gold standard, differ so much? How did the Bank of France manage to...

Why did the failure of Lehman Brothers make the financial crisis dramatically worse? The financial crisis was a process of a build-up of risk during the crisis prior to the Lehman failure. Market participants tried to preserve an option or exit by shortening maturities - the "flight from...

This paper explores how international money markets reflected credit and liquidity risks during the global financial crisis. After matching the currency denomination, we investigate how the Tokyo Interbank Offered Rate (TIBOR) was synchronized with the London Interbank Offered Rate (LIBOR)...

Corporate credit lines are drawn more heavily when funding markets are more stressed. This covariance elevates expected bank funding costs. We show that credit supply is dampened by the associated debt-overhang cost to bank shareholders. Until 2022, this impact was reduced by linking the...