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

Campbell, John Y.

Download This Paper

Open PDF in Browser

Add Paper to My Library

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

NBER Working Paper No. w1806

22 Pages Posted: 19 Jun 2004 Last revised: 10 Dec 2022

See all articles by John Y. Campbell

John Y. Campbell

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 1986

Abstract

The effect of money stock announcements on the Federal funds rate has been attributed informally to the information conveyed by the announcements about aggregate reserve demand. This "Aggregate Information Hypothesis" explains the effect without reference to Federal Reserve intervention in the funds market. In this paper I provide a formal model of the Aggregate Information Hypothesis under lagged reserve accounting.The model relies on imperfect information in the funds market, 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 1980-1983.

Suggested Citation: Suggested Citation

Campbell, John Y., Money Announcements, the Demand for Bank Reserves and the Behavior of the Federal Funds Rate within the Statement Week (1986). NBER Working Paper No. w1806, Available at SSRN: https://ssrn.com/abstract=338845