Interbank payments and the daily federal funds rate

Craig H. Furfine*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

63 Scopus citations


Predictable patterns in the level and volatility of interbank payments match those found in the daily federal funds rate. This paper develops a structural model of bank reserve management that rationalizes this finding. Implications of the model are then estimated using a panel of large banking institutions. Simulations based upon these empirical estimates suggest that patterns in payment activity can explain much of the observed intra-maintenance period movement in the federal funds rate around its target. Further, volatility in bank payment flows generates funds rate volatility comparable to what is observed.

Original languageEnglish (US)
Pages (from-to)535-553
Number of pages19
JournalJournal of Monetary Economics
Issue number2
StatePublished - Oct 2000


  • Daily federal funds rate
  • E52
  • G21
  • Interbank payments
  • Reserve requirements

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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