The execution of monetary policy
Subtitle: a tale of two central banks
By: Leonardo Bartolini and Alessandro Prati.
Contributors: Prati, Alessandro, 1961-; Federal Reserve Bank of New York.
Series: Staff reports ;; no. 165; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 165.
Publisher: Federal Reserve Bank of New York
Published: 2003
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Board of Governors of the Federal Reserve System (U.S.); European Central Bank.; Banks and banking, Central.; Monetary policy -- European Union countries.; Monetary policy -- United States.
Description: "The Eurosystem and the U.S.  Federal Reserve System follow quite different approaches to the execution of monetary policy.  The former institution adopts a "hands-off" approach that largely delegates to depository institutions the task of stabilizing their own liquidity at high frequency.  The latter institution follows a much more "hands-on" approach involving daily intervention to fine-tune the liquidity of the banking system.  We review the implications of these contrasting approaches, focusing on their impact on the high-frequency behavior of very short-term interest rates.  We also examine interest rate behavior following the Y2K date change and the 9/11/2001 crisis--events that required the two central banks to deviate significantly from their customary style of liquidity management.  We find that, despite differences in operational framework, certain elements of the institutions' styles of day-to-day intervention have caused very short-term interest rates to behave similarly in the euro area and the United States.  Significantly, during periods of anticipated or actual crisis, the two institutions have acted very much alike in managing the liquidity of the interbank market in response to shocks"--Federal Reserve Bank of New York web site.
Notes: Includes bibliographical references.
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