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Working Paper
Excess reserves and monetary policy normalization
REVISED 8/14/16: In response to the Great Recession, the Federal Reserve resorted to several unconventional policies that drastically altered the landscape of the federal funds market. The current environment, in which depository institutions are flush with excess reserves, has forced policymakers to design a new operational framework for monetary policy implementation. We provide a parsimonious model that captures the key features of the current federal funds market, along with the instruments introduced by the Federal Reserve to implement its target for the federal funds rate. We use this ...