This paper investigates the hypothesis suggested by Cook and Hahn (1988) that the T-bill rates respond to the announcement of discount rate changes because the market takes discount rate changes to be a signal that the Fed has changed its target for the federal funds rate. Re-Interpreting Cook and Hahn's empirical evidence and using theirs and an alternative methodology, we show that the evidence cannot differentiate their hypothesis from a number of others that have been suggested in the literature. We further find that there is no difference in the relative magnitude or timing of the response during periods when the Fed was directly targeting the funds rate or using a "fuzzy" funds rate target. This result suggests that the market does not simply interpret discount rate changes as a signal that the Fed has changed its target for the funds rate.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
1992-004.
Length: Date of creation: 1992 Date of revision: Publication status: Published in Journal of Money, Credit, and Banking, November 1994 Handle: RePEc:fip:fedlwp:1992-004
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)