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Journal Article
Have Lags in Monetary Policy Transmission Shortened?
Doh, Taeyoung; Foerster, Andrew (2022-12-21)
The Federal Open Market Committee’s monetary policy has expanded beyond changing the federal funds rate to include forward guidance and balance sheet policy. Using these tools may shorten lags in monetary policy transmitting to inflation. Using a proxy funds rate that incorporates tightening from these additional policy tools, we find evidence of a shorter lag in policy transmission to inflation since 2009, though with high associated uncertainty.
Economic Bulletin , Issue December 21, 2022 , Pages 3

Working Paper
Do federal funds futures need adjustment for excess returns? a state-dependent approach
Bundick, Brent (2007)
This paper utilizes a Markov-switching framework to model excess returns in federal funds futures contracts. This framework identifies a high-volatility state where excess returns are large, positive, and volatile and a low-volatility state where excess returns have a lower volatility and are small in absolute value. Federal funds futures rates require adjustment for excess returns only in the high-volatility state. Intermeeting rate cuts of the federal funds rate target always correspond with the high-volatility regime and can explain much of the variation in excess returns. This paper also ...
Research Working Paper , Paper RWP 07-08

Working Paper
Monetary policy, secrecy, and federal funds rate behavior
Dotsey, Michael (1985)
The behavior of the Federal Reserve System can be characterized as secretive with respect to its control of monetary aggregates. One common justification for this secrecy is that markets will overreact to information, causing undue variability in interest rates. However, the consequences of keeping policy objectives hidden has received little formal attention. This paper takes an initial step by examining the variability of the federal funds rate and total reserves under nonborrowed reserve targeting. The major result is that the disclosure of operating procedures will generally increase the ...
Working Paper , Paper 85-04

Working Paper
A federal funds rate equation
Mehra, Yash P. (1995)
This paper presents evidence that indicates that U.S. interest rate policy during most of the 1980s can be described by a reaction function in which the federal funds rate rises if real GDP rises above trend GDP, if actual inflation accelerates, or if the long-term bond rate rises. Money growth when included in the reaction function is significant, indicating that money also influenced policy. The results presented here however indicate that in recent years the Fed has discounted the leading indicator properties of money. In contrast, the bond rate has been a key determinant of the funds rate ...
Working Paper , Paper 95-03

Discussion Paper
The Effect of Fed Funds Rate Hikes on Consumer Borrowing Costs
Boyarchenko, Nina; Plosser, Matthew; Kim, Sooji (2015-12-21)
The target federal funds rate has hovered around zero for nearly a decade, and observers are questioning what effect an increase could have on both the financial markets and the real economy. In this post, we examine the historical reaction of loan rates to target rate increases. Specifically, we examine the interest rates that banks offer on residential mortgages and home equity lines of credit (HELOCs).
Liberty Street Economics , Paper 20151221

Journal Article
To Reach the Fed’s Inflation Target, Interest Rates May Have to Remain Restrictive for Some Time
Matschke, Johannes; Sattiraju, Sai (2023-06-29)
The Federal Reserve has raised the federal funds rate by 500 basis points since March 2022. But how tight is the current policy stance? We account for the federal funds rate, inflation expectations, and the natural rate of interest and find that monetary policy has only been restrictive since 2023:Q1. We find that to bring inflation down to 2 percent, the Federal Reserve may have to keep the federal funds rate in restrictive territory for some time.
Economic Bulletin

Journal Article
Alternative arrangements for the distribution of intraday liquidity
McAndrews, James J. (2006-04)
In July 2006, the Federal Reserve will end its provision of free daylight credit to government-sponsored enterprises (GSEs), financial services corporations created by Congress to establish a secondary market in mortgages and other consumer loans. To meet their payments to investors, the GSEs can use a wide variety of alternative funding arrangements. While such arrangements can in theory distribute liquidity efficiently, a decline in the intraday funds in circulation following the Fed's move may lead to some slowing in payments by both the GSEs and commercial banks.
Current Issues in Economics and Finance , Volume 12 , Issue Apr

Journal Article
Large-dollar payment flows from New York
anonymous (1987-01)
Quarterly Review , Volume 12 , Issue Win , Pages 6-13

Working Paper
Overnight interbank loan markets
Demiralp, Selva; Whitesell, William C.; Preslopsky, Brian (2004)
This paper investigates transactions and interest rates on brokered and direct trades in federal funds, Eurodollar transactions, and repurchase agreements, all of which are used by banks in overnight funding. We expand on earlier work on calendar-day effects in these markets, investigating also volumes of funding in recent years. Our data include daily trades in federal funds reported by major brokers and also records of uncollateralized transactions over the wire transfer system operated by the Federal Reserve. We find that the share of the overnight interbank loan market represented by ...
Finance and Economics Discussion Series , Paper 2004-29

Working Paper
Extracting the expected path of monetary policy from futures rates
Sack, Brian P. (2002)
Federal funds and eurodollar futures contracts are among the most useful instruments for deriving expectations of the future path of monetary policy. However, reading policy expectations from those instruments is complicated by the presence of risk premia. This paper demonstrates how to extract the expected policy path under the assumption that risk premia are constant over time, and under a simple model that allows risk premia to vary. In the latter case, the risk premia are identified under the assumption that policy expectations level out after a long enough horizon. The results provide ...
Finance and Economics Discussion Series , Paper 2002-56

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