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Report
Banks' reserve management, transaction costs, and the timing of the Federal Reserve intervention
Bartolini, Leonardo; Prati, Alessandro; Bertola, Giuseppe (2000)
We use daily data on bank reserves and overnight interest rates to document a striking pattern in the high-frequency behavior of the U.S. market for federal funds: depository institutions tend to hold more reserves during the last few days of each "reserve maintenance period," when the opportunity cost of holding reserves is typically highest. We then propose and analyze a model of the federal funds market where uncertain liquidity flows and transaction costs induce banks to delay trading and to bid up interest rates at the end of each maintenance period. In this context, the central bank's ...
Staff Reports , Paper 109

Working Paper
Regime switching in the dynamic relationship between the federal funds rate and innovations in nonborrowed reserves
Huh, Chan Guk (1996)
This paper examines the dynamic relationship between changes in the funds rate and nonborrowed reserves within a reduced form framework that allows the relationship to have two distinct patterns over time. A regime switching model a la Hamilton (1989) is estimated. On average, CPI inflation has been significantly higher in the regime characterized by large and volatile changes in funds rate. Innovations in money growth are associated with a strong anticipated inflation effect in this high inflation regime, and a moderate liquidity effect in the low inflation regime. Furthermore, an identical ...
International Finance Discussion Papers , Paper 536

Journal Article
Are U.S. reserve requirements still binding?
Peristiani, Stavros; Bennett, Paul (2002-05)
Paper for a conference sponsored by the Federal Reserve Bank of New York entitled Financial Innovation and Monetary Transmission
Economic Policy Review , Volume 8 , Issue May , Pages 53-68

Journal Article
The borrowed-reserves operating procedures: theory and evidence
Thornton, Daniel L. (1988-01)
Review , Issue Jan , Pages 30-54

Report
Testing under non-standard conditions in frequency domain: with applications to Markov regime-switching models of exchange rates and federal funds rate
Mariano, Roberto S.; Gong, Fangxiong (1997)
We propose two test statistics in the frequency domain and derive their exact asymptotic null distributions under the condition of unidentified nuisance parameters. The proposed methods are particularly applicable in unobserved components models. Also, it is shown that the tests have considerable power when applied to a class of Markov regime switching models. We show that, after transforming the Markov regime switching model into the frequency domain representation we only have to face the issue of unidentified nuisance parameters in a nonlinear context. The singularity problem disappears. ...
Staff Reports , Paper 23

Working Paper
Futures prices as risk-adjusted forecasts of monetary policy
Piazzesi, Monika; Swanson, Eric T. (2006)
Many researchers have used federal funds futures rates as measures of financial markets' expectations of future monetary policy. However, to the extent that federal funds futures reflect risk premia, these measures require some adjustment. In this paper, we document that excess returns on federal funds futures have been positive on average and strongly countercyclical. In particular, excess returns are surprisingly well predicted by macroeconomic indicators such as employment growth and financial business-cycle indicators such as Treasury yield spreads and corporate bond spreads. Excess ...
Working Paper Series , Paper 2006-23

Journal Article
A disaggregate analysis of discount window borrowing
Peristiani, Stavros; Hamdani, Kausar (1991-07)
Discount window borrowing is an important source of liquidity for depository institutions. This article estimates the demand for adjustment credit of 240 commercial banks during 1981-90. By focusing on the borrowing behavior of individual banks, the authors are able to clarify some anomalies exhibited by borrowed reserves at the aggregate level.
Quarterly Review , Volume 16 , Issue Sum , Pages 52-62

Monograph
Instruments of the money market (foreword)
Cook, Timothy Q.; LaRoche, Robert K. (1993)
Monograph

Working Paper
The equilibrium Fed funds rate and the indicator properties of term- structure spreads
Bomfim, Antulio N. (1995)
Finance and Economics Discussion Series , Paper 95-40

Journal Article
Using federal funds futures rates to predict Federal Reserve actions
Thornton, Daniel L.; Robertson, John C. (1997-11)
The federal funds futures rate naturally embodies the market's expectation of the average behavior of the federal funds rate. But, as John C. Robertson and Daniel L. Thornton explain, analysts cannot attempt to identify Fed policy from the behavior of the federal funds futures rate without making somewhat arbitrary additional assumptions. The authors investigate the predictive accuracy of a rule based on the federal funds futures rate from October 1988 through August 1997 using an assumption that is sufficient for partially identifying when the market is expecting a Fed action but not for ...
Review , Issue Nov , Pages 45-53

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