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The Federal Funds Market under Bank Deregulation

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  • Cosimano, Thomas F

Abstract

The introduction of competitive interest rates on deposits is shown to effect the optimal decisions of banks by altering their optimal forecast of the federal-funds rate. The movement toward co mpetitive deposit rates increases the size of the monetary base neces sary for the Fed to maintain its deposit targets when deposits and the monetary base are substitutes. In addition there is less uncertainty in the federal-funds market under competitive deposit rates when deposits and the monetary base are substitutes, and the source of uncertainty is not from the supply of deposits. Copyright 1987 by Ohio State University Press.

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  • Cosimano, Thomas F, 1987. "The Federal Funds Market under Bank Deregulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(3), pages 326-339, August.
    • Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:3:p:326-39
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    Cited by:

    1. Dia, Enzo & VanHoose, David, 2017. "Banking in macroeconomic theory and policy," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 149-160.
    2. Enzo Dia & Massimo Giuliodori, 2012. "Portfolio separation and the dynamics of bank interest rates," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(1), pages 28-46, February.
    3. Dong Heon Kim, 2008. "Another Look at Yield Spreads: The Role of Liquidity," Southern Economic Journal, John Wiley & Sons, vol. 74(4), pages 952-970, April.
    4. Enzo Dia, 2004. "Monopolistic Pricing in the Banking Industry: a Dynamic Model," Working Papers 73, University of Milano-Bicocca, Department of Economics, revised May 2004.
    5. Enzo Dia, 2004. "Monopolistic Pricing in the Banking Industry: a Dynamic Portfolio Model," Finance 0411025, University Library of Munich, Germany.
    6. Poutineau, Jean-Christophe & Vermandel, Gauthier, 2017. "Global banking and the conduct of macroprudential policy in a monetary union," Journal of Macroeconomics, Elsevier, vol. 54(PB), pages 306-331.
    7. Balasubramanyan, Lakshmi & VanHoose, David D., 2013. "Bank balance sheet dynamics under a regulatory liquidity-coverage-ratio constraint," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 53-67.
    8. Ronald Mau, 2023. "What Is in a Name? Purchases and Sales of Financial Assets as a Monetary Policy Instrument," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(6), pages 1507-1533, September.
    9. Enzo Dia & David VanHoose, 2022. "Unconventional-Policy Spillovers of U.S. Interest on Reserves within Global Dollar-Denominated Retail Loan and Deposit Markets," CRANEC - Working Papers del Centro di Ricerche in Analisi economica e sviluppo economico internazionale crn2203, Università Cattolica del Sacro Cuore, Centro di Ricerche in Analisi economica e sviluppo economico internazionale (CRANEC).
    10. Enzo Dia, 2004. "Imperfect Information and Monopolistic Pricing in the Banking Industry," Working Papers 74, University of Milano-Bicocca, Department of Economics, revised May 2004.
    11. Dia, Enzo, 2013. "How do banks respond to shocks? A dynamic model of deposit-taking institutions," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3623-3638.
    12. Massimo Giulidori & Enzo Dia, 2009. "The Determinants of Bank Interest Margins: Estimates of a Dynamic Model," Working Papers 157, University of Milano-Bicocca, Department of Economics, revised Mar 2009.
    13. D H Kim, 2003. "Another Look at Yield Spreads: The Role of Liquidity," Economics Discussion Paper Series 0306, Economics, The University of Manchester.
    14. Kenneth J. Kopecky & David D. Van Hoose, 2012. "Imperfect Competition in Bank Retail Markets, Deposit and Loan Rate Dynamics, and Incomplete Pass Through," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(6), pages 1185-1205, September.
    15. Glennon, Dennis & Lane, Julia, 1996. "Financial innovation, new assets, and the behavior of money demand," Journal of Banking & Finance, Elsevier, vol. 20(2), pages 207-225, March.
    16. D H Kim, 2002. "Another look at yield spreads: The role of liquidity," Centre for Growth and Business Cycle Research Discussion Paper Series 04, Economics, The University of Manchester.

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