Overnight Monetary Policy in the United States: Active or Interest-Rate Smoothing?

Kia, Amir

Overnight Monetary Policy in the United States: Active or Interest-Rate Smoothing?

Amir Kia ()
Additional contact information
Amir Kia: Department of Finance and Economics, Utah Valley University

No 05-07, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: This paper investigates the behavior of agents in the United States money and Fed funds markets for the period 1982-2004. It was found that, while agents are forward looking in the money market, their behavior is policy invariant in the Fed funds market. Consequently, the optimal overnight monetary policy would be an interest-ratesmoothing process. It was found, in fact, that such a policy has been followed in the United States. Furthermore, this paper suggests that the lack of a policy invariant relationship between overnight and short-term interest rates is another explanation for conducting an interest-rate-smoothing policy.

Keywords: Interest-rate smoothing; discretionary overnight monetary policy; forward-looking agents; money market; and Fed funds market. (search for similar items in EconPapers)
Pages: 51 pages
Date: 2005-07, Revised 2010-03
Note: JEL codes: E43, E51, E52, E58
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published: in Journal of Macroeconomics, Vol. 32, No. 1 (March 2010), pp. 378–391

Downloads: (external link)
http://www.carleton.ca/economics/wp-content/uploads/cep05-07.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:car:carecp:05-07

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Carleton Economic Papers from Carleton University, Department of Economics C870 Loeb Building, 1125 Colonel By Drive, Ottawa Ontario, K1S 5B6 Canada.
Bibliographic data for series maintained by Court Lindsay ().