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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.

Suggested Citation

  • 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. repec:eee:jmacro:v:54:y:2017:i:pb:p:149-160 is not listed on IDEAS
    2. 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.
    3. D H Kim, 2003. "Another Look at Yield Spreads: The Role of Liquidity," The School of Economics Discussion Paper Series 0306, Economics, The University of Manchester.
    4. 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.
    5. 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.
    6. 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.
    7. Enzo Dia, 2004. "Monopolistic Pricing in the Banking Industry: a Dynamic Portfolio Model," Finance 0411025, EconWPA.
    8. 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.
    9. 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 Univeristy of Manchester.
    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.

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