Increases in the federal funds rate aimed at stabilizing the economy have inevitably been followed by recessions. Recently, peaks in the federal funds rate have occurred 6-16 months before the start of recessions; reductions in interest rates apparently occurred too late to prevent those...

Money markets have two functions, the allocation of liquidity and the processing of information. We develop a model that allows us to evaluate the efficiency of different money market derivatives regarding these two objectives. We assume that due to its size, a large bank receives a more precise...

This paper presents some new results on the price discovery process in both the Canadian and U.S. 10-year Government bond markets using high-frequency data not previously analyzed. Using techniques introduced by Hasbrouck (1995) and Gonzalo-Granger (1995), we look at the relative information...

This paper presents some new results on the price discovery process in both the Canadian and U.S. 10-year Government bond markets using high-frequency data not previously analyzed. Using techniques introduced by Hasbrouck (1995) and Gonzalo-Granger (1995), we look at the relative information...

Over the last two decades, the Federal Open Market Committee (FOMC), the rate-setting body of the United States Federal Reserve System, has become increasingly communicative and transparent. According to policymakers, one of the goals of this shift has been to improve monetary policy...

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...

The market model of interest rates specifies simple forward or Libor rates as lognormally distributed, their stochastic dynamics has a linear volatility function. In this paper, the model is extended to quadratic volatility functions which are the product of a quadratic polynomial and a...