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Money Announcements, the Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week

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  • Campbell, John Y

Abstract

The effect of money stock announcements on the federal funds rate hasbeen attributed informally to the information conveyed by the announcements about aggregate reserved emand. This "Aggregate Information Hypothesis" explains the effect without ref erence to Federal Reserve intervention in the funds market. In this paper, the a uthor provides a formal model of the Aggregate Information Hypothesis under lagged reserve accounting. The model relies on imperfect information in the funds ma rket and on imperfect bank arbitrage of reserve demand between days of the week. Some stylized facts are presented about funds rate behavior in the period 1980-83. Copyright 1987 by Ohio State University Press.

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  • Campbell, John Y, 1987. "Money Announcements, the Demand for Bank Reserves, and the Behavior of the Federal Funds Rate within the Statement Week," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 56-67, February.
  • Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:1:p:56-67
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    1. Cornell, Bradford, 1983. "Monetary policy and the daily behavior of interest rates," Journal of Economics and Business, Elsevier, vol. 35(2), pages 189-203, June.
    2. V. Vance Roley & Carl E. Walsh, 1985. "Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 1011-1039.
    3. MacKinnon, James G. & White, Halbert, 1985. "Some heteroskedasticity-consistent covariance matrix estimators with improved finite sample properties," Journal of Econometrics, Elsevier, vol. 29(3), pages 305-325, September.
    4. Robert J. Shiller & John Y. Campbell & Kermit L. Schoenholtz, 1983. "Forward Rates and Future Policy: Interpreting the Term Structure of Interest Rates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 14(1), pages 173-224.
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