Monetary Policy Operations: Theory, Evidence, and Tools for Quantitative Analysis

Ricardo Lagos and Gaston Navarro

No 31370, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We formulate a quantitative dynamic equilibrium theory of trade in the fed funds market, calibrate it to fit a comprehensive set of market-wide and micro-level cross-sectional observations, and use it to make two contributions to the operational side of monetary policy implementation. First, we produce global structural estimates of the aggregate demand for reserves—a crucial decision-making input for modern central banks. Second, we propose diagnostic tools to gauge the central bank’s ability to track a given fed funds target, and the heterogeneous incidence of policy actions on the shadow cost of funding across banks.

JEL-codes: C78 D83 E44 E49 G1 G18 G2 G21 G23 G28 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
Note: ME
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