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

  • James J. McAndrews
  • Asani Sarkar
  • Zhenyu Wang

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
Date of revision:
Handle: RePEc:fip:fednsr:335
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  1. John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
  2. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
  3. Suresh Sundaresan & Zhenyu Wang, 2006. "Y2K options and the liquidity premium in Treasury bond markets," Staff Reports 266, Federal Reserve Bank of New York.
  4. Fran├žois-Louis Michaud & Christian Upper, 2008. "What drives interbank rates? Evidence from the Libor panel," BIS Quarterly Review, Bank for International Settlements, March.
  5. 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.
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