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...

Discount window borrowing is an important source of liquidity for depository institutions. This article estimates the demand for adjustment credit of 240 commercial banks during 1981-90. By focusing on the borrowing behavior of individual banks, the authors are able to clarify some anomalies...

Paper for a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary Transmission

In October 1982 the FOMC deemphasized M1 and moved to what is commonly referred to as a borrowed reserves operating procedure. Sometime thereafter the FOMC switched to a funds rate targeting procedure but never formally announced the change. Given the close correspondence between a borrowed...

We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they have met, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive...

We use minute-by-minute daily transaction-level payments data to document the cross-sectional and time-series behavior of the estimated prices and quantities negotiated by commercial banks in the fed funds market. We study the frequency and volume of trade, the size distribution of loans, the...

To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds...