Banks' reserve management, transaction costs, and the timing of federal reserve intervention

Arbeitspapier

We use daily data on bank reserves and overnight interest rates to document a striking pattern in the high-frequency behavior of the U.S. market for federal funds: depository institutions tend to hold more reserves during the last few days of each reserve maintenance period, when the opportunity cost of holding reserves is typically highest. We then propose and analyze a model federal funds market where uncertain liquidity flows transaction costs induce banks to delay trading bid up interest rates at end each period. In this context, central bank's interest-rate-smoothing policy causes high supply liquid be associated with around settlement days.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 109

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Monetary Policy
• Subject: Mindestreservepolitik ; Bankenliquidität ; Geldmarkt ; Theorie ; USA

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bartolini, Leonardo ; Bertola, Giuseppe ; Prati, Alessandro
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/60614
• Last update: 10.03.2025, 11:43 AM CET