An Examination of Federal Reserve Behavior: An Applied Reaction Function Approach

Paul A. Sundell

No 278322, Staff Reports from United States Department of Agriculture, Economic Research Service

Abstract: Federal Reserve behavior and interest rates are crucial determinants of the general well-being of the agricultural sector. This report investigates the factors that have influenced Federal Reserve policy and ultimately the level of interest rates. The author develops a partial adjustment model for the Federal funds rate and documents improved forecasting performance in comparison to competing models on an in-sample and out-of-sample basis. The author attributes the improved forecasting performance to the inclusion of international variables, a domestic banking default risk proxy, and slope dummy variables that capture shifts over time in the Federal Reserve's reaction to the unemployment rate and deviations in M1 from target.

Keywords: Agricultural and Food Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 37
Date: 1990-04
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:uerssr:278322

DOI: 10.22004/ag.econ.278322

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