Despite its pervasive presence in world financial markets, there are few studies of interdealer broker markets. This paper examines the trading behavior of primary dealers in the 5-year Treasury note interdealer broker market. The analysis examines trading patterns, announcement effects, and volatility–volume relations. The results show that trading frequency is consistent with activity motivated by public information or dealer's private knowledge of inventory or order flow information. Additionally, although the interdealer broker market is an anonymous electronic compilation and matching system without designated market makers, trade size does not appear to have any information content. Journal of Economic Literature Classification Numbers: C22, G14.

Credit rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate a number of programs intended to expand the supply of credit to the private sector. Expansionary monetary policy is often seen as a way of reducing the extent of credit rationing. We examine the consequences of a common policy tool in these economies: the use of expansionary monetary policy combined with direct central bank lending to inject credit. In the context of a small open economy we show that such a policy increases long-run production if and only if the economy is in a development trap. Moreover government credit programs often lead to endogenously arising aggregate volatility. Thus the case for government intervention in credit markets relies largely on the notion that output is artificially low because the economy is in a development trap. However, it is the case that the kind of policy we consider can be used to eliminate certain indeterminacies of equilibrium created by endogenous credit market frictions. Journal of Economic Literature Classification Numbers: E44, O16, O42.