Day-to-day monetary policy and the volatility of the federal funds interest rate

Leonardo Bartolini, Giuseppe Bertola and Alessandro Prati

No 110, Staff Reports from Federal Reserve Bank of New York

Abstract: We propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements, and study the interaction of profit-maximizing banks with a central bank targeting interest rates at high frequency. The model yields predictions on biweekly patterns of the federal funds rate's volatility and on its response to changes in target rates and in intervention procedures, such as those implemented by the Fed in 1994. Theoretical results are consistent with empirical patterns of interest rate volatility in the U.S. market for federal funds.

Keywords: Federal funds rate; Monetary policy - United States (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-cba and nep-mon
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Related works:
Journal Article: Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate (2002)
Working Paper: Day-To-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:110

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