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Friday, July 17, 2020 | History

4 edition of The liquidity effect in the federal funds market found in the catalog.

The liquidity effect in the federal funds market

Seth B. Carpenter

The liquidity effect in the federal funds market

evidence from daily open market operations

by Seth B. Carpenter

  • 99 Want to read
  • 14 Currently reading

Published by Federal Reserve Board in Washington, D.C .
Written in English


Edition Notes

StatementSeth Carpenter and Selva Demiralp.
SeriesFinance and economics discussion series ;, 2004-61, Finance and economics discussion series (Online) ;, 2004-61.
ContributionsDemiralp, Selva.
Classifications
LC ClassificationsHG1
The Physical Object
FormatElectronic resource
ID Numbers
Open LibraryOL3390517M
LC Control Number2004620229


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The liquidity effect in the federal funds market by Seth B. Carpenter Download PDF EPUB FB2

We use forecast errors made by the Federal Reserve while preparing open market operations to identify a liquidity effect at a daily frequency in the federal funds market. Unlike Hamilton (), we find a liquidity effect on many days of the reserve maintenance period besides settlement : Seth Carpenter, Selva Demiralp.

the transmission mechanism explicitly model the federal funds market to estimate a liquidity effect. In particular, Strongin notes that the failure of other researchers to find a liquidity effect can be traced, at least in part, to a failure to account for the Federal Reserve’s accommodation of shifts in the demand for money or reserves.

The Liquidity Effect in the Federal Funds Market: Evidence at the Monthly Frequency Inthispaper,wearguethatmuchoftheresearchintothelinkbetweenmoney and interest rates suffers from misspecification. The measure of money and the measure of interest rates are not always well matched.

In examining theCited by:   The Liquidity Effect in the Federal Funds Market: Evidence at the Monthly Frequency SETH CARPENTER Seth Carpenteris Assistant Director, Division of Monetary Affairs, Board of Governors of the Federal Reserve System (E‐mail:[email protected]).Cited by: Previous research indicated that the daily liquidity effect, or the change in the federal funds rate associated with an exogenous change in Fed balances Finance and Economics Discussion Series: Whither the Liquidity Effect: The Impact of Federal Reserve Open Market Operations in Recent Years: Ruth Judson, Elizabeth Klee, United States Federal Reserve Board: Authors: Ruth Judson, Elizabeth Klee.

We use forecast errors made by the Federal Reserve while preparing open market operations to identify a liquidity effect at a daily frequency in the federal funds market. We find a liquidity effect on most days of the reserve maintenance period in addition to settlement day.

Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's :// It is commonly believed that the Fed’s ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations.

This article uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March ?q=Federal+Funds+Rate.

In effect, the Fed is saying that, as a bank regulator, will not object to, and indeed is encouraging, drawing on liquidity and capital resources as banks meet the elevated credit needs of their   the liquidity effect into market risk and a stress test is still at an embryonic stage.

1 Two recent additions to the literature by private and central bank communities, which provide a comprehensive review of the measurement of market risk, are Wilson () and Session 4 of Part II in Board of Governors of the The report by Andolfatto and Ihrig provides a road map for how the FOMC is likely to deal with the liquidity crisis in the short-term money markets, both immediately and in terms of addressing some of the structural flaws in Fed policy illustrated by Selgin in his book.

The once private market for fed funds will now be truly "federal" going /23/nationalizing-the-federal-funds-market.

Introduction. Finance literature has shown the significant effect of stock liquidity on asset pricing. Amihud and Mendelson () and many subsequent researchers document that illiquid stocks generally have higher expected returns.

After Chordia et al. (), Hasbrouck and Seppi (), and Huberman and Halka () document the existence of commonality in liquidity, the role of liquidity Afonso et al. () show that the number of lenders in the federal funds market fell from approximately – in the summer of to after Lehman Brothers' default, and the fed funds rate in experienced a one-day jump by >60 basis points on Septemthe date on which Lehman Brothers filed for Chapter 11 ://   Febru The Liquidity Coverage Ratio and Corporate Liquidity Management.

Vladimir Yankov 1. This note examines the changes in the liquidity management at banks and nonbank financial firms in the United States that occurred following the proposal of the liquidity coverage ratio (LCR) requirement in and its finalization in Money Market Fund: A money market fund is an investment whose objective is to earn interest for shareholders while maintaining a net asset value (NAV) of $1 per share.

A money market fund’s   Some market participants tell me that the very low bond default rates seen recently, realized and expected, are themselves a reflection of liquidity.

That is, excess market liquidity may have allowed less than creditworthy firms to refinance their obligations, thereby only deferring their financial ://.