This paper studies when and by how much the Fed and the ECB change their target interest rates. I develop a new nonlinear bivariate framework, which allows for elaborate dynamics and potential interdependence between the two countries, as opposed to linear feedback rules, such as a Taylor rule,...

The Federal Reserve (Fed) has maintained a general trend toward increased transparency and gradualism. This paper investigates the implications of these historical developments for the anticipation of monetary policy actions and adjustment of interest rates. In a theoretical framework, we...

The traditional view of the monetary transmission mechanism rests on the premise that the Federal Reserve (Fed) controls the level of the federal funds rate via open market operations and the liquidity effect. By contrast, this paper argues that the Fed also manipulates the federal funds rate...

Federal funds futures are popular tools for calculating market-based monetary policy surprises. These surprises are usually thought of as the difference between expected and realized federal funds target rates at the current FOMC meeting. This paper demonstrates the use of federal funds futures...

We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor--changes in the federal funds rate target-and find that they are not. Instead, we find that two factors are...

In recent years, financial markets appear better able to anticipate FOMC policy changes. Beginning in the late 1980s and early 1990s, longer-term interest rates and futures rates have tended to incorporate movements in the federal funds rate several months in advance, in contrast to the largely...