Using Federal Funds Futures Contracts for Monetary Policy Analysis

34 Pages Posted: 5 Oct 2005

See all articles by Refet S. Gürkaynak

Refet S. Gürkaynak

Bilkent University - Department of Economics

Date Written: July 2005

Abstract

Federal funds futures are popular tools for calculating market-based monetary policy surprises. These surprises are usually thought of as the difference between expected and realized federal funds target rates at the current FOMC meeting. This paper demonstrates the use of federal funds futures contracts to measure how FOMC announcements lead to changes in expected interest rates after future FOMC meetings. Using several 'surprises' at different horizons, timing, level, and slope components of unanticipated policy actions are defined. These three components have differing effects on asset prices that are not captured by the contemporaneous surprise measure.

Keywords: Measuring monetary policy surprises, timing slope and level surprises, asset prices

JEL Classification: E43, E44, E52, E58

Suggested Citation

Gürkaynak, Refet S., Using Federal Funds Futures Contracts for Monetary Policy Analysis (July 2005). FEDS Working Paper No. 2005-29, Available at SSRN: https://ssrn.com/abstract=813225 or http://dx.doi.org/10.2139/ssrn.813225

Refet S. Gürkaynak (Contact Author)

Bilkent University - Department of Economics ( email )

06533 Ankara
Turkey

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