The Topology of the Federal Funds Market - FEDERAL RESERVE BANK of NEW YORK

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Staff Reports

The Topology of the Federal Funds Market

November 2008 Number 354

JEL classification: E40, E58, E59, G10

Authors: Morten L. Bech and Enghin Atalay

The recent turmoil in global financial markets underscores the importance of the federal funds market as a means of distributing liquidity throughout the financial system and a tool for implementing monetary policy. In this paper, we explore the network topology of the federal funds market. We find that the network is sparse, exhibits the small-world phenomenon, and is disassortative. In addition, reciprocity loans track the federal funds rate, and centrality measures are useful predictors of the interest rate of a loan.

Available only in PDF PDF

32 pages / 3.08 mb

For a published version of this report, see Morten L. Bech and Enghin Atalay, "The Topology of the Federal Funds Market," Physica A: Statistical Mechanics and Its Applications 389, no. 22 (November 2010): 5223-46.

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