Pure theory of the federal funds rate

While the target federal funds rate represents a policy instrument, the effective federal funds rate is determined in a competitive interbank market. The paper proposes a theory of its determination. This yields a specific term structure of interest rates, an account of why the money multiplier approach failed, and a demonstration that interest on reserves does not change bank incentives.

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Year of publication:	2016
Authors:	Homburg, Stefan
Publisher:	Hannover : Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät
Subject:	federal funds rate \| term structure of interest rates \| excess reserves \| money multiplier \| zero lower bound

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Series:	Hannover Economic Papers (HEP) ; 578
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	865196850 [GVK] hdl:10419/144852 [Handle] RePEc:han:dpaper:dp-578 [RePEc]
Classification:	E43 - Determination of Interest Rates; Term Structure Interest Rates ; E51 - Money Supply; Credit; Money Multipliers ; E58 - Central Banks and Their Policies ; G01 - Financial Crises
Source:	EconStor

Persistent link: https://www.econbiz.de/10011521183