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Monetary policy pass-through after the LCR

Author

Listed:
  • Anderson, Alyssa
  • Tase, Manjola

Abstract

After the implementation of the Liquidity Coverage Ratio (LCR), trading in the federal funds market, which generally has a relatively favorable LCR treatment, became more driven by market liquidity. As a result, we document that pass-through of the federal funds rate to other short-term interest rates strengthened.

Suggested Citation

  • Anderson, Alyssa & Tase, Manjola, 2024. "Monetary policy pass-through after the LCR," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523005098
    DOI: 10.1016/j.econlet.2023.111483
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    References listed on IDEAS

    as
    1. Banegas, Ayelen & Tase, Manjola, 2020. "Reserve balances, the federal funds market and arbitrage in the new regulatory framework," Journal of Banking & Finance, Elsevier, vol. 118(C).
    2. Sriya Anbil & Alyssa G. Anderson & Zeynep Senyuz, 2020. "What Happened in Money Markets in September 2019?," FEDS Notes 2020-02-27, Board of Governors of the Federal Reserve System (U.S.).
    3. Elizabeth Klee & Zeynep Senyuz & Emre Yoldas, 2019. "Effects of Changing Monetary and Regulatory Policy on Money Markets," International Journal of Central Banking, International Journal of Central Banking, vol. 15(4), pages 165-205, October.
    4. Sam Schulhofer-Wohl, 2019. "Understanding Recent Fluctuations in Short-Term Interest Rates," Chicago Fed Letter, Federal Reserve Bank of Chicago.
    5. Alyssa G. Anderson & Wenxin Du & Bernd Schlusche, 2021. "Arbitrage Capital of Global Banks," NBER Working Papers 28658, National Bureau of Economic Research, Inc.
    6. Alyssa G. Anderson & Manjola Tase, 2023. "LCR Premium in the Federal Funds Market," Finance and Economics Discussion Series 2023-071, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Federal funds; Short-term funding markets; Monetary policy transmission; Liquidity Coverage Ratio;
    All these keywords.

    JEL classification:

    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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