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Further Results on a Black Swan in the Money Market

Author

Listed:
  • John Taylor

    (Department of Economics, Stanford University)

  • John Williams

    (Federal Reserve Bank of San Fransisco)

Abstract

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).

Suggested Citation

  • John Taylor & John Williams, 2008. "Further Results on a Black Swan in the Money Market," Discussion Papers 07-046, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:07-046
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    File URL: http://www-siepr.stanford.edu/repec/sip/07-046.pdf
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    References listed on IDEAS

    as
    1. John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
    2. McAndrews, James & Sarkar, Asani & Wang, Zhenyu, 2017. "The effect of the term auction facility on the London interbank offered rate," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 135-152.
    3. William Dudley, 2008. "May you live in interesting times: the sequel," Proceedings 1071, Federal Reserve Bank of Chicago.
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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