Stressed, not frozen: the Federal Funds market in the financial crisis

@inproceedings{Afonso2010StressedNF,
  title={Stressed, not frozen: the Federal Funds market in the financial crisis},
  author={Gara M. Afonso and Anna Kovner and Antoinette Schoar},
  year={2010}
}
This paper examines the impact of the financial crisis of 2008, specifically the bankruptcy of Lehman Brothers, on the federal funds market. Rather than a complete collapse of lending in the presence of a market-wide shock, we see that banks became more restrictive in their choice of counterparties. Following the Lehman bankruptcy, we find that amounts and spreads became more sensitive to a borrowing bank's characteristics. While the market did not contract dramatically, lending rates increased… CONTINUE READING

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