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Journal Article
An empirical analysis of the GCF Repo® Service
Davis, Isaac; Copeland, Adam; Martin, Antoine (2015)
This article examines how dealers use the GCF Repo service. It begins by explaining the strategies that dealers employ when trading GCF Repo and then uses empirical analysis to quantify the predominance of these strategies. Looking across all dealers and all days, the study finds that on an average day, at least 23 percent of dealers focus on strategies to raise cash and at least 20 percent focus on managing their inventory of securities. This activity involves using GCF Repo to both exclusively source collateral and perform collateral swaps.
Economic Policy Review , Issue 2 , Pages 25-37

Report
A study of competing designs for a liquidity-saving mechanism
McAndrews, James J.; Martin, Antoine (2008-07-01)
We study two designs for a liquidity-saving mechanism (LSM), a queuing arrangement used with an interbank settlement system. We consider an environment where banks are subjected to liquidity shocks. Banks must make the decision to send, queue, or delay their payments after observing a noisy signal of the shock. With a balance-reactive LSM, banks can set a balance threshold below which payments are not released from the queue. Banks can choose their threshold such that the release of a payment from the queue is conditional on the liquidity shock. With a receipt-reactive LSM, a payment is ...
Staff Reports , Paper 336

Discussion Paper
Stabilizing the Tri-Party Repo Market by Eliminating the “Unwind”
Martin, Antoine (2011-07-20)
On July 6, 2011, the Task Force on Tri-Party Repo Infrastructure—an industry group sponsored by the New York Fed—released a Progress Report in which it reaffirmed the goal of eliminating the wholesale “unwind” of repos (and the requisite extension of more than a trillion dollars of intraday credit by repo clearing banks), but acknowledged unspecified delays in achieving that goal. The “unwind” is the settlement of repos that currently takes place each morning and replaces credit from investors with credit from the clearing banks. As I explain in this post, by postponing settlement ...
Liberty Street Economics , Paper 20110720

Report
A note on bank lending in times of large bank reserves
Skeie, David R.; McAndrews, James J.; Martin, Antoine (2011)
The amount of reserves held by the U.S. banking system reached $1.5 trillion in April 2011. Some economists argue that such a large quantity of bank reserves could lead to overly expansive bank lending as the economy recovers, regardless of the Federal Reserve?s interest rate policy. In contrast, we show that the size of bank reserves has no effect on bank lending in a frictionless model of the current banking system, in which interest is paid on reserves and there are no binding reserve requirements. We also examine the potential for balance-sheet cost frictions to distort banks? lending ...
Staff Reports , Paper 497

Report
Should there be intraday money markets?
McAndrews, James J.; Martin, Antoine (2008)
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 ...
Staff Reports , Paper 337

Working Paper
Monetary policy implementation with an ample supply of reserves
Afonso, Gara; Kim, Kyungmin; Martin, Antoine; Nosal, Ed; Potter, Simon M.; Schulhofer-Wohl, Sam (2020-01-18)
Methods of monetary policy implementation continue to change. The level of reserve supply—scarce, abundant, or somewhere in between—has implications for the efficiency and effectiveness of an implementation regime. The money market events of September 2019 highlight the need for an analytical framework to better understand implementation regimes. We discuss major issues relevant to the choice of an implementation regime, using a parsimonious framework and drawing from the experience in the United States since the 2007-2009 financial crisis. We find that the optimal level of reserve supply ...
Working Paper Series , Paper WP-2020-02

Working Paper
Can the U.S. Interbank Market Be Revived?
Kim, Kyungmin; Martin, Antoine; Nosal, Ed (2018-11-01)
Large-scale asset purchases by the Federal Reserve as well as new Basel III banking regulations have led to important changes in U.S. money markets. Most notably, the interbank market has essentially disappeared with the dramatic increase in excess reserves held by banks. We build a model in the tradition of Poole (1968) to study whether interbank market activity can be revived if the supply of excess reserves is decreased sufficiently. We show that it may not be possible to revive the market to precrisis volumes due to costs associated with recent banking regulations. Although the volume of ...
FRB Atlanta Working Paper , Paper 2018-13

Discussion Paper
Hey, Economist! What’s the Case for Central Bank Digital Currencies?
Lee, Michael Junho; Martin, Antoine (2021-04-30)
Since the launch of Bitcoin and other first-generation cryptocurrencies, there has been extensive experimentation in the digital currency space. So far, however, digital currencies have yet to gain much ground as a means of payment. Is there a vacuum in the landscape of digital money and payments that central banks are naturally positioned to fill? In this post, Michael Lee and Antoine Martin, economists in the New York Fed’s Money and Payment Studies function, answer some questions regarding the concept of central bank digital currencies (CBDCs).
Liberty Street Economics , Paper 20210430

Working Paper
Financial intermediaries, markets, and growth.
Fecht, Falko; Huang, Kevin X. D.; Martin, Antoine (2004)
We build a model in which financial intermediaries provide insurance to households against a liquidity shock. Households can also invest directly on a financial market if they pay a cost. In equilibrium, the ability of intermediaries to share risk is constrained by the market. This can be beneficial because intermediaries invest less in the productive technology when they provide more risk-sharing. Our model predicts that bank-oriented economies should grow slower than more market-oriented economies, which is consistent with some recent empirical evidence. We show that the mix of ...
Working Papers , Paper 04-24

Journal Article
Monetary policy implementation: common goals but different practices
Martin, Antoine; Amstad, Marlene (2011-11)
While the goals that guide monetary policy in different countries are very similar, central banks diverge in their methods of implementing policy. This study of the policy frameworks of four central banks?the Federal Reserve, the European Central Bank, the Bank of England, and the Swiss National Bank?focuses on two notable areas of difference. The first is the choice of an interest rate target, a standard feature of conventional monetary policy. The second is the choice of instruments for managing the central banks? expanded balance sheets?a decision made necessary by the banks? ...
Current Issues in Economics and Finance , Volume 17 , Issue Nov

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