Should There Be Intraday Money Markets? - FEDERAL RESERVE BANK of NEW YORK

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Staff Reports

Should There Be Intraday Money Markets?

July 2008 Number 337

JEL classification: E44, E58

Authors: Antoine Martin and James McAndrews

In this paper, we consider the case for an intraday market for reserves. We discuss the separate roles of intraday and overnight reserves and argue that an intraday market could be organized in the same way as the overnight market. We present arguments for and against a market for intraday reserves when the marginal cost of overnight reserves is positive. We also consider how reserves should be supplied when the cost of overnight reserves is zero. In that case, the distinction between overnight and intraday reserves becomes blurred, raising an important question: What is the role of the overnight market?

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