Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate

29 Pages Posted: 14 Feb 2006

See all articles by Leonardo Bartolini

Leonardo Bartolini

affiliation not provided to SSRN (deceased)

Giuseppe Bertola

University of Turin - Department of Economics

Alessandro Prati

International Monetary Fund (IMF) - Research Department, Deceased

Multiple version iconThere are 3 versions of this paper

Date Written: December 2000

Abstract

We propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements, and study the interaction of profit-maximizing banks with a central bank targeting interest rates at high frequency. The model yields predictions on biweekly patterns of the federal funds rate`s volatility and on its response to changes in target rates and in intervention procedures, such as those implemented by the Federal Reserve in 1994. Theoretical results are consistent with empirical patterns of interest rate volatility in the U.S. market for federal funds.

Keywords: Monetary policy, volatility, interest rate

JEL Classification: J11

Suggested Citation

Bartolini (deceased), Leonardo and Bertola, Giuseppe and Prati, Alessandro, Day-to-Day Monetary Policy and the Volatility of the Federal Funds Interest Rate (December 2000). IMF Working Paper No. 00/206, Available at SSRN: https://ssrn.com/abstract=880858

Leonardo Bartolini (deceased) (Contact Author)

affiliation not provided to SSRN (deceased)

Giuseppe Bertola

University of Turin - Department of Economics ( email )

Lungo Dora Siena 100
Torino, 10153
Italy
+39 011 670 4405 (Phone)

HOME PAGE: http://https://sites.google.com/site/gipbert

Alessandro Prati

International Monetary Fund (IMF) - Research Department, Deceased ( email )