AMER.INST: Financial Development and Economic Performance: The Emergence of the U.S. Market for Bankers' Acceptances in the early 1900s

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                ABSTRACTS IN ECONOMIC HISTORY
                     (c) 2001 EH.Net
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Name: J. Peter Ferder
Email: ferderer@macalester.edu
Institution: Macalester College

Co-author: none

Title: Financial Development and Economic Performance: The Emergence
of the U.S. Market for Bankers' Acceptances in the early 1900s

Internet Address of abstracted work: not available

By mail:
1600 Grand Avenue
St. Paul, MN 55105

Phone: 651.696.6093
Fax: 651.696.6746

Language: English

Abstract:
The U.S. market for bankers' acceptances was given birth as a result
of the Federal Reserve Act of 1914. The framers of the Act were
motivated by the desire to build an active and liquid market for
bankers' acceptances and other short-term bills. They believed that
the creation of the Federal Reserve Banks, endowed with the power to
rediscount bills, was crucial for this purpose. Drawing on insights
from the modern market microstructure literature, this paper explores
the development of liquidity in the secondary market for Bankers'
Acceptances during early 1900s. We examine the provision of liquidity
to this market by private "market makers" and the role that the
Federal Reserve played to support their efforts (i.e., to serve as
the market maker of last resort). We also examine the impact of
changes in liquidity on the equilibrium relationships between money
market rates.

Bibliography: Ferderer, J. Peter. "Financial Development and Economic
Performance: The Emergence of the U.S. Market for Bankers' Acceptances in the early 1900s." Manuscript, Macalester College, 2001.

Subject: H
Geographical Area: 7
Country/Region: USA
Time Period: 8

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