It is widely believed that the Fed controls the funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the federal funds rate. Recently, however, several economists have suggested that open market operations may not be...

A large empirical literature attempts to identify US monetary policy shocks using the effective federal funds rate. This paper compares the time series behavior of the effective federal funds rate to 10 US interest rates with maturities ranging form overnight to 10 years. Using a spectral...

Structural vector autoregression (SVAR) models are commonly used to investigate the effect of structural shocks on economic variables. The identifying restrictions imposed in many of these exercises have been criticized in the literature. This paper extends this literature by showing that if the...

One of the most influential tests of the expectations hypothesis is Mankiw and Miron (1986), who found that the spread between the long-term and short-term rates provided predictive power for the short-term rate before the Fed's founding but not after. They suggested that the failure of the...

This paper investigates the discount rate policies of five Federal Reserve chairmen: Martin, Burns, Miller, Volcker and Greenspan. Both in terms of the reasons given for making discount rate changes and the frequency of discount rate changes, the discount rate policies of Martin and Greenspan...

Based on a switching-cost model, we examine empirically the hypotheses that bank loan mark-ups are countercyclical and asymmetric in their responsiveness to recessionary and expansionary impulses. The first econometric model treats changes in the mark-up as a continuous variable. The second...

This paper uses a dynamic factor model recently studied by Forni, Hallin, Lippi and Reichlin (2000) and Forni, Giannone, Lippi and Reichlin (2004) to analyze the response of 21 U.S. interest rates to news. Using daily data, we find that the news that affects interest rates daily can be...

Despite the fact that efforts to identify it empirically have largely been futile, the liquidity effect plays a central role in conventional monetary theory and policy. Recently, however, an increasing volume of empirical work [Christiano and Eichenbaum (1992a,b), Christiano, Eichenbaum and...

It is common practice to estimate the response of asset prices to monetary policy actions using market-based measures of monetary policy shocks, such as the federal funds futures rate. I show that because interest rates and market-based measures of monetary policy shocks respond simultaneously...