Further Results on a Black Swan in the Money Market
Using alternative measures of term lending rates and counterparty risk and a wide variety of econometric specifications, we find that counterparty risk has a robust significant effect on interest rate spreads in the term inter-bank loan markets. In contrast, we do not find comparably robust evidence of significant negative effects of the Fed’s term auction facility (TAF) on term lending rates. This analysis incorporates the latest data from the ongoing turmoil in the money markets and confirms earlier findings reported in Taylor and Williams (2008).
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- John B. Taylor & John C. Williams, 2009.
"A black swan in the money market,"
Federal Reserve Bank of San Francisco, issue Jan.
- James McAndrews & Asani Sarkar & Zhenyu Wang, 2008. "The effect of the Term Auction Facility on the London Inter-Bank Offered Rate," Staff Reports 335, Federal Reserve Bank of New York.
- William C. Dudley, 2008. "May you live in interesting times: the sequel," Proceedings 1071, Federal Reserve Bank of Chicago.
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