Federal Funds Rate Stationarity: New Evidence

Frédérique Bec and Charbel Bassil

No 2008-35, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: This paper investigates the stationarity of the Federal Funds Rate. It contributes to the existing empirical literature in two ways. First, it explores both the presence of unit root and structural changes in the federal funds rate monthly data, by allowing for interaction between these two assumptions as suggested by the recent work of Lee and Strazicich. The second contribution consists in testing formally for the number of breaks. Using monthly data from January 1960 to April 2008, we find strong evidence in favor of a stationary process with two breaks. The two breaks identified correspond respectively to the first oil shock and to the change in the Fed operating procedure in the early eighties.

Keywords: Federal Funds Rate; Unit root test; Structural change; Endogenous break dates. (search for similar items in EconPapers)
JEL-codes: C12 C13 C22 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Federal Funds Rate Stationarity: New Evidence (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2008-35

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