From organization to activity in the US collateralized interbank market

This paper studies and connects market organization and activity in the US collateralized interbank market using an assumption-neutral approach. We apply cluster analysis to aggregate activity factors suggested by prior studies to support two market organizations: three-tier and core-periphery. We find that four bank-specific factors and one economic-conditions factor explain interbank activity for both alternative organizations. We also find-evidence that the interbank market organization affects institutions' borrowing and lending. While both organizations moderate interbank activity, the three-tier structure detects distinct market operations which are not represented in the core-periphery structure. (C) 2016 Federal Reserve Bank of Cleveland. Published by Elsevier B.V.