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Reserve levels and intraday federal funds rate behavior

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  • Spence Hilton
  • Warren B. Hrung

Abstract

We analyze the impact of aggregate reserve levels on the intraday behavior of the federal funds rate over a sample period extending from 2002 to 2005. We study both how the reserve levels accumulated earlier in a maintenance period influence the morning level of the funds rate relative to the target set by the FOMC, and how same-day reserve levels as well as the reserve levels accumulated earlier affect intraday movements of the funds rate. The impact of recurring calendar events on the behavior of the federal funds rate is also explored. In general, we find a negative relationship between our measures of reserve levels and our two measures of federal funds rate behavior.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 284.

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Date of creation: 2007
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Handle: RePEc:fip:fednsr:284

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Keywords: Federal funds rate ; Bank reserves ; Monetary policy;

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References

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  1. Lawrence R. Glosten & Ravi Jagannathan & David E. Runkle, 1993. "On the relation between the expected value and the volatility of the nominal excess return on stocks," Staff Report 157, Federal Reserve Bank of Minneapolis.
  2. Leonardo Bartolini & Svenja Gudell & Spence Hilton & Krista Schwarz, 2005. "Intraday trading in the overnight federal funds market," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 11(Nov).
  3. Carpenter, Seth & Demiralp, Selva, 2006. "The Liquidity Effect in the Federal Funds Market: Evidence from Daily Open Market Operations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 901-920, June.
  4. Leonardo Bartolini & R. Spence Hilton & Alessandro Prati, 2006. "Money Market Integration," IMF Working Papers 06/207, International Monetary Fund.
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Cited by:
  1. Huberto M. Ennis & Todd Keister, 2008. "Understanding monetary policy implementation," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 235-263.

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