Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Kansas City
Research Working Paper
The response of the term structure of interest rates to federal funds rate target changes
V. Vance Roley
Gordon H. Sellon
Abstract

In this paper, we first specify a theoretical model of the term structure's response to federal funds rate target changes. The model considers not only the immediate response to target changes, but also the response in anticipation of a policy change. The model is then estimated over the 1974-79 and 1987-95 periods, and the model's restrictions cannot be rejected. The results suggest that policy changes have become more predictable since 1987, causing more of the target change to be reflected in market yields before the policy action is taken. The results also suggest that the economic shocks the Federal Reserve chooses to offset are very persistent, if not permanent.


No download available
Cite this item
V. Vance Roley & Gordon H. Sellon, The response of the term structure of interest rates to federal funds rate target changes, Federal Reserve Bank of Kansas City, Research Working Paper 96-08, 1996.
More from this series
JEL Classification:
Subject headings:
Keywords: Federal funds market (United States) ; Monetary policy - United States
For corrections, contact Lu Dayrit ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal