An Empirical Study of Trade Dynamics in the Interbank Market - Federal Reserve Bank of New York

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An Empirical Study of Trade Dynamics in the Interbank Market

Previous title: “Trade Dynamics in the Market for Federal Funds”

February 2012 Number 549
Revised: June 2014

JEL classification: E42, E44, G21

Authors: Gara Afonso and Ricardo Lagos

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 interbank market. We study the frequency and volume of trade, the size distribution of loans, the distribution of bilateral rates, and the intraday dynamics of the reserve balances held by commercial banks. We find evidence of the importance of the liquidity provision achieved by commercial banks that act as de facto intermediaries of funds.

Available only in PDF pdf

40 pages / 1,188 kb

For a published version of this report, see Gara Afonso and Ricardo Lagos, "Trade Dynamics in the Market for Federal Funds," Econometrica 83, no. 1 (January 2015): 263-313.

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