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The effect of the Term Auction Facility on the London Inter-Bank Offered Rate

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Author Info
James McAndrews
Asani Sarkar
Zhenyu Wang

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Abstract

This paper examines the effects of the Federal Reserve's Term Auction Facility (TAF) on the London Inter-Bank Offered Rate (LIBOR). The particular question investigated is whether the announcements and operations of the TAF are associated with downward shifts of the LIBOR; such an association would provide one indication of the efficacy of the TAF in mitigating liquidity problems in the interbank funding market. The empirical results suggest that the TAF has helped to ease strains in this market.

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 335.

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Date of creation: 2008
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Handle: RePEc:fip:fednsr:335

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Keywords: Federal Reserve System ; Interbank market ; Financial markets ; Bank liquidity;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. John B. Taylor & John C. Williams, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January. [Downloadable!]
    Other versions:
  2. Suresh Sundaresan & Zhenyu Wang, 2006. "Y2K options and the liquidity premium in Treasury bond markets," Staff Reports 266, Federal Reserve Bank of New York. [Downloadable!]
  3. Andrew Kuritzkes & Til Schuermann & Scott Weiner, 2005. "Deposit Insurance and Risk Management of the U.S. Banking System: What is the Loss Distribution Faced by the FDIC?," Journal of Financial Services Research, Springer, vol. 27(3), pages 217-242, September. [Downloadable!] (restricted)
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  1. Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2009. "Do central bank liquidity facilities affect interbank lending rates?," Working Paper Series 2009-13, Federal Reserve Bank of San Francisco. [Downloadable!]
  2. Stephen G. Cecchetti, 2008. "Crisis and Responses: the Federal Reserve and the Financial Crisis of 2007-2008," NBER Working Papers 14134, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Tao Wu, 2008. "On the effectiveness of the Federal Reserve's new liquidity facilities," Working Papers 0808, Federal Reserve Bank of Dallas. [Downloadable!]
  4. Jochen R. Andritzky & Andreas Jobst & Sylwia Barbara Nowak & Yacine Aït-Sahalia & Natalia T. Tamirisa, 2009. "How to Stop a Herd of Running Bears? Market Response to Policy Initiatives during the Global Financial Crisis," IMF Working Papers 09/204, International Monetary Fund. [Downloadable!]
  5. Adam B. Ashcraft & Morten L. Bech & W. Scott Frame, 2008. "The Federal Home Loan Bank System: the lender of next-to-last resort?," Staff Reports 357, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  6. Cho-Hoi Hui & Hans Genberg & Tsz-Kin Chung, 2009. "Funding Liquidity Risk and Deviations from Interest-Rate Parity During the Financial Crisis of 2007-2009," Working Papers 0913, Hong Kong Monetary Authority. [Downloadable!]
  7. Cho-Hoi Hui & Hans Genberg & Tsz-Kin Chung, 2009. "Liquidity, Risk Appetite and Exchange Rate Movements During the Financial Crisis of 2007-2009," Working Papers 0911, Hong Kong Monetary Authority. [Downloadable!]
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