IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v45y1990i2p467-77.html
   My bibliography  Save this article

Expectations and the Treasury Bill-Federal Funds Rate Spread over Recent Monetary Policy Regimes

Author

Listed:
  • Simon, David P

Abstract

This paper shows that the spread between the three-month Treasury bill and the federal funds rate has significant predictive power for the future change in the federal funds rate during the volatile nonborrowed reserves operating regime, but it has less and no predictive power during the borrowed reserves regime and the federal funds targeting regime, respectively. These findings suggest that Treasury bill rates forecast future federal funds rates most accurately when the Federal Reserve follows a well-defined rule that does not smooth the impact of shocks on the federal funds rate. Copyright 1990 by American Finance Association. See http://www.jstor.org for details.

Suggested Citation

  • Simon, David P, 1990. " Expectations and the Treasury Bill-Federal Funds Rate Spread over Recent Monetary Policy Regimes," Journal of Finance, American Finance Association, vol. 45(2), pages 467-477, June.
  • Handle: RePEc:bla:jfinan:v:45:y:1990:i:2:p:467-77
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:eee:ecofin:v:42:y:2017:i:c:p:597-617 is not listed on IDEAS
    2. Amir KIA, "undated". "Developing a Market-Based Monetary Policy Transparency Index and Testing Its Impact on Risk and Volatility in the United States," EcoMod2009 21500052, EcoMod.
    3. N. K. Kishor & H. A. Marfatia, 2013. "Does federal funds futures rate contain information about the treasury bill rate?," Applied Financial Economics, Taylor & Francis Journals, vol. 23(16), pages 1311-1324, August.
    4. Daniel L. Thornton, 2005. "Predictions of short-term rates and the expectations hypothesis of the term structure of interest rates," Working Papers 2004-010, Federal Reserve Bank of St. Louis.
    5. D H Kim, 2002. "Another look at yield spreads: The role of liquidity," Centre for Growth and Business Cycle Research Discussion Paper Series 04, Economics, The Univeristy of Manchester.
    6. D H Kim, 2003. "Another Look at Yield Spreads: The Role of Liquidity," The School of Economics Discussion Paper Series 0306, Economics, The University of Manchester.
    7. Heather Anderson, 1999. "Explanations of an empirical puzzle: what can be learnt from a test of the rational expectations hypothesis?," Journal of Economic Methodology, Taylor & Francis Journals, vol. 6(1), pages 31-59.
    8. Sarno, Lucio & Thornton, Daniel L. & Valente, Giorgio, 2007. "The Empirical Failure of the Expectations Hypothesis of the Term Structure of Bond Yields," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 81-100, March.
    9. Thomas B. King, 2003. "Discipline and liquidity in the market for federal funds," Supervisory Policy Analysis Working Papers 2003-02, Federal Reserve Bank of St. Louis.
    10. Seo, Byeongseon, 2003. "Nonlinear mean reversion in the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11), pages 2243-2265.
    11. Thornton, Daniel L., 2006. "Tests of the Expectations Hypothesis: Resolving the Campbell-Shiller Paradox," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 511-542, March.
    12. Downing, Chris & Oliner, Stephen, 2007. "The term structure of commercial paper rates," Journal of Financial Economics, Elsevier, vol. 83(1), pages 59-86, January.
    13. M. Isabel Martínez-Serna & Eliseo Navarro-Arribas, 2002. "El modelo de McCallum. Evidencia empírica en la estructura temporal de los tipos de interés española," Investigaciones Economicas, Fundación SEPI, vol. 26(2), pages 323-357, May.
    14. Christian Bredemeier & Christoph Kaufmann & Andreas Schabert, 2017. "Interest Rate Spreads and Forward Guidance," Working Paper Series in Economics 96, University of Cologne, Department of Economics.
    15. Sarno, Lucio & Thornton, Daniel L., 2003. "The dynamic relationship between the federal funds rate and the Treasury bill rate: An empirical investigation," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1079-1110, June.
    16. Amir Kia, 2011. "Developing a Market-Based Monetary Policy Transparency Index: Evidence from the United States," Economic Issues Journal Articles, Economic Issues, vol. 16(2), pages 53-80, September.
    17. Lin-Yee Hin & Nikolai Dokuchaev, 2016. "Short Rate Forecasting Based On The Inference From The Cir Model For Multiple Yield Curve Dynamics," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-33, March.
    18. Linnemann, Ludger & Schabert, Andreas, 2015. "Liquidity premia and interest rate parity," Journal of International Economics, Elsevier, vol. 97(1), pages 178-192.
    19. Sagi Akron, 2016. "Business cycles and the expectations of short-term central bank rates in light of Construal Level Theory," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 171-187, August.
    20. Christian Bredemeier & Falko Juessen & Andreas Schabert, 2017. "Fiscal Multipliers and Monetary Policy: Reconciling Theory and Evidence," Working Paper Series in Economics 95, University of Cologne, Department of Economics.
    21. Thornton, Daniel L., 2005. "Tests of the expectations hypothesis: Resolving the anomalies when the short-term rate is the federal funds rate," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2541-2556, October.
    22. Lizardo Radhames A. & Mollick Andre Varella, 2011. "The Impact of Chinese Purchases of U.S. Government Debt on the Treasury Yield Curve," Global Economy Journal, De Gruyter, vol. 11(4), pages 1-23, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:45:y:1990:i:2:p:467-77. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/afaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.