Operational problems and aggregate uncertainty in the federal funds market

Elizabeth Klee

No 2007-49, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper uses operational problems at commercial banks in sending Fedwire payments as a proxy for aggregate uncertainty in end-of-day Fed account positions and then examines funds market behavior on those days. The results suggest that increased uncertainty is associated with a deviation of the federal funds rate from the FOMC?s target rate, the magnitude depending on the severity of the difficulty, the payment volume of the affected participant, and the time of day. Moreover, discount window borrowing picks up on days with operational difficulties. These effects are generally transitory, and markets revert back to previous levels the next day.

Keywords: Federal funds market (United States); Monetary policy (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2007-49

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