Marcia Stigum Money Market Pdf 34

An important change in the administration of the discount window that is being proposed by the Fed is to set the discount rate above the federal funds rate target. This could allow for more reliance on explicit market pricing to determine the volume of discount window borrowing and remove the perceived stigma to borrowing. That is, eligibility requirements would be streamlined and rendered consistent with reliance on the discount window as a relatively unfettered source of liquidity for financially sound banks during tight money market conditions that would otherwise result in a spike in the federal funds rate.

marcia stigum money market pdf 34