The Over-the-Counter Theory of the Fed Funds Market: A Primer

Gara Afonso, Ricardo Lagos

    Research output: Contribution to journalArticlepeer-review


    We present a dynamic over-the-counter model of the fed funds market and use it to study the determination of the fed funds rate, the volume of loans traded, and the intraday evolution of the distribution of reserve balances across banks. We also investigate the implications of changes in the market structure, as well as the effects of central bank policy instruments such as open market operations, the discount window lending rate, and the interest rate on bank reserves.

    Original languageEnglish (US)
    Pages (from-to)127-154
    Number of pages28
    JournalJournal of Money, Credit and Banking
    Issue numberS2
    StatePublished - Jun 1 2015


    • Bargaining
    • Federal funds market
    • Over-the-counter market
    • Search

    ASJC Scopus subject areas

    • Accounting
    • Finance
    • Economics and Econometrics


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