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The topology of the federal funds market

Author

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  • Bech, Morten L.
  • Atalay, Enghin

Abstract

We explore the network topology of the federal funds market. This market is important for distributing liquidity throughout the financial system and for the implementation of monetary policy. The recent turmoil in global financial markets underscores its importance. We find that the network is sparse, exhibits the small-world phenomenon, and is disassortative. Centrality measures are useful predictors of the interest rate of a loan.

Suggested Citation

  • Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
  • Handle: RePEc:eee:phsmap:v:389:y:2010:i:22:p:5223-5246
    DOI: 10.1016/j.physa.2010.05.058
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    More about this item

    Keywords

    Network; Topology; Interbank; Money market;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • G1 - Financial Economics - - General Financial Markets

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