The Impact of Banks’ Cumulative Reserve Position on Federal Funds Rate Behavior

International Journal of Central Banking, Vol. 6, No. 3, pp. 101-118, September 2010

18 Pages Posted: 1 May 2007 Last revised: 9 Sep 2010

See all articles by Spence Hilton

Spence Hilton

Federal Reserve Bank of New York - Research Group; National Bureau of Economic Research (NBER)

Warren B. Hrung

Federal Reserve Bank of New York

Date Written: September 7, 2010

Abstract

We analyze the impact that reserve levels accumulated through the preceding day in a reserve maintenance period have on the level of the federal funds rate each morning prior to when open market operations are arranged. Our empirical results and other evidence provided about intraday patterns of the federal funds rate demonstrate that the pace at which reserves are supplied over a maintenance period to meet banks’ total reserve requirements is an important determinant of federal funds rate behavior.

Keywords: federal funds rate, open market operations, reserve requirements

JEL Classification: E5, G21

Suggested Citation

Hilton, Spence and Hrung, Warren B., The Impact of Banks’ Cumulative Reserve Position on Federal Funds Rate Behavior (September 7, 2010). International Journal of Central Banking, Vol. 6, No. 3, pp. 101-118, September 2010, Available at SSRN: https://ssrn.com/abstract=1673168

Spence Hilton (Contact Author)

Federal Reserve Bank of New York - Research Group ( email )

33 Liberty Street
New York, NY 10045
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Warren B. Hrung

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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