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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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    File URL: http://research.stlouisfed.org/wp/1996/96-001.pdf
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    References listed on IDEAS

    as
    1. V. Vance Roley & Rick Troll, 1984. "The impact of discount rate changes on market interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Jan, pages 27-39.
    2. 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.
    3. Cook, Timothy & Hahn, Thomas, 1988. "The Information Content of Discount Rate Announcements and Their Effect on Market Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(2), pages 167-180, May.
    4. Batten, Dallas S. & Thornton, Daniel L., 1984. "Discount rate changes and the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 3(3), pages 279-292, December.
    5. Daniel L. Thornton, 1982. "The discount rate and market interest rates: what's the connection?," Review, Federal Reserve Bank of St. Louis, issue Jun, pages 3-14.
    6. Hakkio, Craig S. & Pearce, Douglas K., 1992. "Discount rate policy under alternative operating procedures: An empirical investigation," International Review of Economics & Finance, Elsevier, vol. 1(1), pages 55-72.
    7. 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.
    8. Robert V. Roosa, 1959. "Credit Policy at the Discount Window: Comment," The Quarterly Journal of Economics, Oxford University Press, vol. 73(2), pages 333-337.
    9. 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.
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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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