The Federal Funds Rate and the Channels of Monetary Transnission

Ben Bernanke

No 3487, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: First, we show that the interest rate on Federal funds is extremely informative about future movements of real macroeconomic variables, more so than monetary aggregates or other interest rates. Next, we argue that the reason for this forecasting is that the funds rate sensitively records shocks to the supply of (not the demand for) bank reserves, i.e. the funds rate is a good indicator of monetary policy actions. Finally, using innovations to the fuels rate as a measure of changes in monetary policy, we present evidence consistent with the view that monetary policy works at least in part through "credit" (that is, bank loans) as well as through "money" (that is, bank deposits) - even though bank loans fail to Granger-cause real variables.

Date: 1990-10
Note: EFG ME
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Citations: View citations in EconPapers (30)

Published as American Economic Review Volume 84, No. 4, pp. 901-921 September 1992

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Related works:
Journal Article: The Federal Funds Rate and the Channels of Monetary Transmission (1992)
Working Paper: The federal funds rate and the channels of monetary transmission (1989)
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