Why were changes in the federal funds rate smaller in the 1990s?

Arabinda Basistha () and Richard Startz

Journal of Applied Econometrics, 2004, vol. 19, issue 3, 339-354

Abstract: We identify two major changes in the dynamics of the federal funds rate in the 1990s. We model the desired rate in a two-regime setting, one when the Fed makes no change and the other when the Fed is moving the desired rate to a new level. We find that the 1990s saw a longer duration in the no-change regime as well as smaller changes in the other regime. The smaller changes were neither due to a less aggressive Fed nor due to lower volatility of the fundamentals. In fact, the Fed responded more aggressively to changes in fundamentals in the 1990s. Copyright © 2004 John Wiley & Sons, Ltd.

Date: 2004
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Working Paper: Why Were Changes in the Federal Funds Rate Smaller in the 1990s? (2002)
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DOI: 10.1002/jae.745

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