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Discount rate policies of five Federal Reserve Chairmen

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  • Daniel L. Thornton

Abstract

This paper investigates the discount rate policies of five Federal Reserve chairmen: Martin, Burns, Miller, Volcker and Greenspan. Both in terms of the reasons given for making discount rate changes and the frequency of discount rate changes, the discount rate policies of Martin and Greenspan were very similar, as were those of Burns and Volcker. The discount rate policy of Chairman Miller differed from either of these groups. Measured by the money market's response to discount rate changes, the discount rate policy of Burns and Volcker was the most effective and Miller's the least effective. Evidence is presented that suggests that the differential response is due to the fact that the discount rate policy of Burns and Volcker provided the market with more complete information than that of Martin and Greenspan. The evidence also supports critics of the Federal Reserve's discount rate policy prior to the early 1960s.

Suggested Citation

  • Daniel L. Thornton, 1996. "Discount rate policies of five Federal Reserve Chairmen," Working Papers 1996-001, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:1996-001
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    References listed on IDEAS

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    2. Edward C. Simmons, 1956. "A Note On The Revival Of Federal Reserve Discount Policy," Journal of Finance, American Finance Association, vol. 11(4), pages 413-421, December.
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    6. V. Vance Roley & Rick Troll, 1984. "The impact of discount rate changes on market interest rates," Economic Review, Federal Reserve Bank of Kansas City, vol. 69(Jan), pages 27-39.
    7. Warren L. Smith, 1958. "The Discount Rate as a Credit-Control Weapon," Journal of Political Economy, University of Chicago Press, vol. 66(2), pages 171-171.
    8. Wagster, John, 1993. "The Information Content of Discount Rate Announcements Revisited: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 132-137, February.
    9. Waud, Roger N, 1970. "Public Interpretation of Federal Reserve Discount Rate Changes: Evidence on the 'Announcement Effect'," Econometrica, Econometric Society, vol. 38(2), pages 231-250, March.
    10. Robert V. Roosa, 1959. "Credit Policy at the Discount Window: Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 73(2), pages 333-337.
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    Cited by:

    1. María José Gutiérrez & Jesús Vázquez, "undated". "The Changing Behavior of the Term Structure of Post-War U.S. Interest Rates and Changes in the Federal Reserve Chairman. Is There a Link?," Working Papers on International Economics and Finance 01-03, FEDEA.

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