Using federal funds futures contracts for monetary policy analysis

Refet Gürkaynak

No 2005-29, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Federal funds futures are popular tools for calculating market-based monetary policy surprises. These surprises are usually thought of as the difference between expected and realized federal funds target rates at the current FOMC meeting. This paper demonstrates the use of federal funds futures contracts to measure how FOMC announcements lead to changes in expected interest rates after future FOMC meetings. Using several 'surprises' at different horizons, timing, level, and slope components of unanticipated policy actions are defined. These three components have differing effects on asset prices that are not captured by the contemporaneous surprise measure.

Keywords: Monetary policy; Federal funds rate; Federal funds market (United States) (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac and nep-mon
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Citations: View citations in EconPapers (34)

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