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9. The net size of the Eurodollar market measures the amount of credit actually extended to nonbanks. 10. Large Eurocurrency loans are made by bank syndicates. EXERCISES 1. Why must Eurobanks operate with narrower spreads than domestic banks? What would happen if the spreads were equal in both markets? 2. Use T-accounts to explain the difference between the gross and net size of the Eurodollar market. Eurocurrency Markets and the LIBOR 119 3. Create an example of $10 million being deposited in the Eurodollar Apergis, N., 1997. Domestic and eurocurrency yields: any exchange rate link? evidence from market by a US manufacturing firm, Motorola. Your example should include at least one interbank transaction before the dollars are bor- rowed by a French public utility firm, Paris Electric. How is the gross size of the Eurodollar market affected by your example? What about the net size? 4. Discuss how the Eurobanks can survive when they operate with such a small spread. 5. What could be the risks for depositors if they decide to use the Eurocurrency market for their deposits? 6. What are the IBFs? Why did the Federal Reserve authorize the estab- lishment of the IBFs? Explain. FURTHER READING a VAR model I Policy Model 19 (10), 41-49. mation analysis of interest