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The Information Content of Discount Rate Announcements and Their Effect on Market Interest Rates

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Author Info
Cook, Timothy
Hahn, Thomas
Abstract

This paper presents evidence that throughout the 1973-85 period the Federal Reserve systematically used certain types of discount rate a nnouncements to signal changes in its policy instrument, the federal funds rate. Market participants understood the signals contained in d iscount rate announcements and used them to revise their expectations of the funds rate. These revisions in funds rate expectations caused movements in Treasury bill rates. Copyright 1988 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 20 (1988)
Issue (Month): 2 (May)
Pages: 167-80
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Handle: RePEc:mcb:jmoncb:v:20:y:1988:i:2:p:167-80

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  1. Thornton, Daniel L., 2000. "The relationship between the federal funds rate and the Fed's federal funds rate target : is it open market or open mouth operations?," Discussion Paper Series 1: Economic Studies 2000,09, Deutsche Bundesbank, Research Centre. [Downloadable!]
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  2. Abdullah Iqbal, Susanne Espenlaub, Norman Strong, 2006. "The Long-Run Performance of UK Rights Issuers," Frontiers in Finance and Economics, Lille Graduate School of Management, vol. 3(2), pages 18-54, December. [Downloadable!]
  3. Choi, Woon Gyu, 1999. "Estimating the Discount Rate Policy Reaction Function of the Monetary Authority," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 379-401, July-Aug.. [Downloadable!]
  4. Daniel L. Thornton, 1992. "Why do T-bill rates react to discount rate changes?," Working Papers 1992-004, Federal Reserve Bank of St. Louis. [Downloadable!]
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  5. Manfred J.M. Neumann & Jens Weidmann, 1997. "The Information Content of German Discount Rate Changes," Macroeconomics 9706006, EconWPA. [Downloadable!]
  6. Daniel L. Thornton, 1996. "Discount rate policies of five Federal Reserve Chairmen," Working Papers 1996-001, Federal Reserve Bank of St. Louis. [Downloadable!]
  7. Amir Kia, 2005. "Overnight Monetary Policy in the United States: Active or Interest-Rate Smoothing?," Carleton Economic Papers 05-07, Carleton University, Department of Economics. [Downloadable!]
  8. Michael Dueker & Daniel L. Thornton, 1994. "Asymmetry in the prime rate and firms' preference for internal finance," Working Papers 1994-017, Federal Reserve Bank of St. Louis. [Downloadable!]
  9. Timothy Cook & Thomas Hahn, 1988. "The effect of changes in the federal funds rate target on market interest rates in the 1970s," Working Paper 88-04, Federal Reserve Bank of Richmond. [Downloadable!]
  10. Daniel L. Thornton, 1996. "Does the Fed's new policy of immediate disclosure affect the market?," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 77-88. [Downloadable!]
  11. Tarun Chordia & Asani Sarkar & Avanidhar Subrahmanyam, 2001. "An Empirical Analysis of Stock and Bond Market Liquidity: Forthcoming in the Review of Financial Studies," University of California at Los Angeles, Anderson Graduate School of Management 1018, Anderson Graduate School of Management, UCLA. [Downloadable!]
  12. Don Bredin & Gerard O’Reilly & Simon Stevenson, 2007. "Monetary Shocks and REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 315-331, October. [Downloadable!] (restricted)
  13. Daniel L. Thornton, 1998. "Lifting the veil of secrecy from monetary policy: evidence from the Fed's early discount rate policy," Working Papers 1998-003, Federal Reserve Bank of St. Louis. [Downloadable!]
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  14. Grant McQueen & V. Vance Roley, 1990. "Stock Prices, News, and Business Conditions," NBER Working Papers 3520, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Marc Simpson & Sanjay Ramchander & James Webb, 2007. "The Asymmetric Response of Equity REIT Returns to Inflation," The Journal of Real Estate Finance and Economics, Springer, vol. 34(4), pages 513-529, May. [Downloadable!] (restricted)
  16. Gitit G. Gershgoren, Shmuel Hauser, 2006. "Stock Market Reaction to Unexpected Changes in Interest Rates," Frontiers in Finance and Economics, Lille Graduate School of Management, vol. 3(2), pages 1-17, December. [Downloadable!]
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