Enghin Atalay

The topology of the federal funds market

We explore the network topology of the federal funds market. This market is important for distributing liquidity throughout the financial system and for the implementation of monetary policy. The recent turmoil in global financial markets underscores its importance. We find that the network is sparse, exhibits the small-world phenomenon, and is disassortative. Centrality measures are useful predictors of the interest rate of a loan.

The Topology of the Federal Funds Market

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.

Network structure of production

Complex social networks have received increasing attention from researchers. Recent work has focused on mechanisms that produce scale-free networks. We theoretically and empirically characterize the buyer–supplier network of the US economy and find that purely scale-free models have trouble matching key attributes of the network. We construct an alternative model that incorporates realistic features of firms’ buyer–supplier relationships and estimate the model’s parameters using microdata on firms’ self-reported customers. This alternative framework is better able to match the attributes of the actual economic network and aids in further understanding several important economic phenomena.

Sources of Variation in Social Networks

What explains the large variation in the number of contacts (degree) that different participants of social networks have: age, randomness, or some unobservable fitness measure? To answer this question, I extend the model presented in Jackson and Rogers (2007) to allow individuals to vary in their ability to attract contacts. I estimate the parameters of the extended model, using a social network of citations among high-energy physics papers, and find that the extended Jackson–Rogers model can parsimoniously fit the degree distribution of each age cohort. Moreover, both the length of time spent in the network and the unobservable fitness measure are important in explaining the observed variation in participantsʼ degrees.

The Welfare Effects of a Liquidity-Saving Mechanism

This paper considers the welfare effect of introducing a liquidity-saving mechanism (LSM) in a real-time gross settlement (RTGS) payment system. We study the planners problem to get a better understanding of the economic role of an LSM and find that an LSM can achieve the planners allocation for some parameter values. The planners allocation cannot happen without an LSM, as long as some payments can be delayed without cost. We show that, in equilibrium with an LSM, there can be either too few or too many payments settled early compared with the planners allocation, depending on the parameter values. Using Fedwire data to calibrate our model, we describe the equilibrium that would arise with an LSM and compare welfare with and without an LSM. Our results suggest that introducing an LSM could have significant benefits.

Quantifying the Benefits of a Liquidity-Saving Mechanism

This paper attempts to quantify the benefits associated with operating a liquidity-saving mechanism (LSM) in Fedwire, the large-value payment system of the Federal Reserve. Calibrating the model of Martin and McAndrews (2008), we find that potential gains are large compared to the likely cost of implementing an LSM, on the order of hundreds of thousands of dollars per day.