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Working Paper
Families' use of payment instruments during a decade of change in the U.S. payment system
Klee, Elizabeth C. (2006)
In the U.S., the share of payments made "electronically"--with credit cards, debit cards, and direct payments--grew from 25 percent in 1995 to over 50 percent in 2002 (BIS, 2004). This paper frames this aggregate change in the context of individual behavior. Family level data indicate that the share of families using or holding these instruments also increased over the same period. The personal characteristics that predict use and holdings are relatively constant over time. Furthermore, the results indicate that the aggregate change may be correlated with a greater incidence in ...
Finance and Economics Discussion Series , Paper 2006-01

Working Paper
The Fragility of Perfectly Safe Digital Money
Klee, Elizabeth C.; Lubis, Arazi; Ross, Chase; Ross, Sharon Y.; Vardoulakis, Alexandros (2026-06-02)
Digital money differs from previous forms of money in an important way: it unbundles trust. Instead of relying on a trustworthy institution to settle payments, it relies on decentralized verification, whose cost is priced separately through congestion-sensitive gas fees. This arrangement creates a novel fragility from the interaction of two opposing forces: network externalities, which make digital money more valuable as adoption rises, and congestion fees, which make it more costly to use. We show that these forces generate strategic complementarities in redemption decisions and can create ...
Finance and Economics Discussion Series , Paper 2026-037

Working Paper
The Federal Reserve’s Response to the 2023 Banking Turmoil: The Bank Term Funding Program
Arseneau, David M.; Klee, Elizabeth C.; Kotidis, Antonis; Siemer, Michael (2025-11-06)
The Bank Term Funding Program (BTFP) was an emergency liquidity facility set up by the Federal Reserve in March 2023 following the failure of Silicon Valley Bank which experienced a classic bank run driven by weak fundamentals. This paper provides an in-depth discussion of the design and implementation of the BTFP and presents some evidence on program outcomes. It also quantifies how the lending terms compare to those of the Discount Window—the Federal Reserve’s main standing liquidity facility. The BTFP successfully acted as a backstop source of funding for depository institutions with ...
Finance and Economics Discussion Series , Paper 2025-099

Working Paper
A study of U.S. monetary policy implementation: demand for reserves on a period average basis
Judson, Ruth; Klee, Elizabeth C. (2009)
This paper provides new estimates of banks' demand for excess reserve balances on a period average basis. Consistent with theoretical work, we find that the demand for excess depends critically on uncertainty of flows in and out of reserve accounts. We also document the variability of demand for excess reserve balances by institution size, evaluate different models for forecasting demand for excess on a period average basis, and report the forecasting performance of each of these models. Finally, we present analysis of the period of financial turmoil seen over the year since August, 2007.
Finance and Economics Discussion Series , Paper 2009-22

Journal Article
Profits and balance sheet developments at U.S. commercial banks in 2004
Natalucci, Fabio M.; Klee, Elizabeth C. (2005-04)
U.S. commercial banks continued to be highly profitable in 2004. Return on assets and return on equity declined moderately, but the economy's continued expansion and supportive financial conditions helped keep bank profits in the elevated range that has prevailed since the mid-1990s. Profits were trimmed a bit by a narrowing of banks' net interest margins as the yield curve flattened and competition put pressure on loan spreads. In addition, gains in non-interest income were less pronounced than in 2003, and non-interest expenses increased. However, the continued improvement in the overall ...
Federal Reserve Bulletin , Volume 91 , Issue Spr

Journal Article
Profits and balance sheet developments at U.S. commercial banks in 2005
Klee, Elizabeth C.; Weinbach, Gretchen C. (2006-06)
Federal Reserve Bulletin , Volume 92 , Issue Jun

Working Paper
Analyzing Federal Reserve asset purchases: from whom does the Fed buy?
Klee, Elizabeth C.; Carpenter, Seth B.; Ihrig, Jane E.; Demiralp, Selva (2013)
Asset purchases have become an important monetary policy tool of the Federal Reserve in recent years. To date, most studies of the Federal Reserve's asset purchases have tried to measure the interest rate effects of the policies. Several papers provide evidence that these programs do have important effects on longer-term market interest rates. The theory of how asset purchases work, however, is less well developed. Some of the empirical studies point to "preferred habitat" models in which investors do not have the same objectives, and therefore prefer to hold different types and maturities ...
Finance and Economics Discussion Series , Paper 2013-32

Working Paper
Take it to the Limit : The Debt Ceiling and Treasury Yields
Klee, Elizabeth C.; Ferris, Erin E. Syron; Stevens, Cailey; Cashin, David B. (2017-05)
We use the 2011 and 2013 U.S. debt limit impasses to examine the extent to which investors react to a heightened possibility of financial contagion. To do so, we first model the response of yields on government debt to a potential debt limit "breach." We then demonstrate empirically that yields on all Treasuries rose by 4 to 8 basis points during both impasses, while excess yields on bills at risk of delayed principal payments were significantly larger in 2013. Perhaps counterintuitively, our model suggests market participants placed a lower probability on financial contagion resulting from ...
Finance and Economics Discussion Series , Paper 2017-052

Report
The mechanics of a graceful exit: interest on reserves and segmentation in the federal funds market
Bech, Morten L.; Klee, Elizabeth C. (2009-12-01)
To combat the financial crisis that intensified in the fall of 2008, the Federal Reserve injected a substantial amount of liquidity into the banking system. The resulting increase in reserve balances exerted downward price pressure in the federal funds market, and the effective federal funds rate began to deviate from the target rate set by the Federal Open Market Committee. In response, the Federal Reserve revised its operational framework for implementing monetary policy and began to pay interest on reserve balances in an attempt to provide a floor for the federal funds rate. Nevertheless, ...
Staff Reports , Paper 416

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