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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. Reciprocity tracks the federal funds rate and centrality measures are useful predictors of the interest rate of a loan. JEL Classification: E4, E58, E59, G1

Suggested Citation

  • Bech, Morten L. & Atalay, Enghin, 2008. "The topology of the federal funds market," Working Paper Series 986, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2008986
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    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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