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Federal Reserve Bank of New York
Staff Reports
An empirical study of trade dynamics in the interbank market
Gara Afonso
Ricardo Lagos
Abstract

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 distribution of bilateral fed funds 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 fed funds.


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Gara Afonso & Ricardo Lagos, An empirical study of trade dynamics in the interbank market, Federal Reserve Bank of New York, Staff Reports 550, 2012, revised 01 Jun 2014.
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Note: Previous title: “An Empirical Study of Trade Dynamics in the Fed Funds Market”
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Keywords: monetary policy; federal funds market; federal funds rate; interbank markets
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