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Federal Reserve Bank of New York
Staff Reports
The over-the-counter theory of the fed funds market: a primer
Gara Afonso
Ricardo Lagos

We present a dynamic over-the-counter model of the fed funds market, and use it to study the determination of the fed funds rate, the volume of loans traded, and the intraday evolution of the distribution of reserve balances across banks. We also investigate the implications of changes in the market structure, as well as the effects of central bank policy instruments such as open market operations, the Discount Window lending rate, and the interest rate on bank reserves.

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Gara Afonso & Ricardo Lagos, The over-the-counter theory of the fed funds market: a primer, Federal Reserve Bank of New York, Staff Reports 660, 01 Dec 2014.
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Note: For a published version of this report, see Gara Afonso and Ricardo Lagos, "The Over-the-Counter Theory of the Fed Funds Market: A Primer," Journal of Money, Credit and Banking 47, no. 52 (June 2015): 127-54.
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Keywords: Fed funds market; search; bargaining; over-the-counter
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