Declining required reserves, funds rate volatility, and open market operations
By: Selva Demiralp and Dennis Farley.
Contributors: Farley, Dennis.
Series: Finance and economics discussion series ;; 2003-27; Finance and economics discussion series (Online) ;; 2003-27.
Publisher: Federal Reserve Board
Published: 2003
Place of publication: Washington, D.C
Language: eng
Format: Electronic resource
Subjects: Open market operations -- Mathematical models.; Bank reserves -- Mathematical models.
Description: "The standard view of the monetary transmission mechanism rests on the central bank's ability to manipulate the overnight interest rate by controlling the reserve supply.  In the 1990s, there was a significant decline in the level of reserve balances in the U.S.  accompanied at first by an increase in the funds rate volatility.  However, following this initial rise, volatility declined.  In this paper, we find evidence of a structural break in volatility.  We then estimate a tobit model of the major types of temporary open market operations and conclude that there have been changes in the Desk's reaction function that played a major role in controlling volatility"--Federal Reserve Board web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 7/26/2004.
Also available in print.
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Mode of access: World Wide Web.