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Discrete Policy Changes and Empirical Models of the Federal Funds Rate

Version
v0
Resource Type
Dataset : survey data
Creator
  • Dueker, Michael J. (Federal Reserve Bank of St. Louis)
  • Rasche, Robert H. (Federal Reserve Bank of St. Louis)
Other Title
  • Archival Version (Subtitle)
Publication Date
2005-03-15
Funding Reference
  • Federal Reserve Bank of St. Louis
Language
English
Free Keywords
economic conditions; interest rates; monetary policy
Description
  • Abstract

    Empirical models of the federal funds rate almost uniformly use the quarterly or monthly average of the daily rates. One empirical question about the federal funds rate concerns the extent to which monetary policymakers smooth this interest rate. Under the hypothesis of rate smoothing, policymakers set the interest rate this period equal to a weighted average of the rate inherited from the previous quarter and the rate implied by current economic conditions, such as the Taylor rule rate. Perhaps surprisingly, however, little attention has been given to measuring the interest rate inherited from the previous quarter. Previous tests for interest rate smoothing have assumed that the quarterly or monthly average from the previous period is the inherited rate. The authors of this study, in contrast, suggest that the end-of-quarter level of the target federal funds rate is the inherited rate, and empirical tests support this proposition. The authors show that this alternative view of the rate inherited from the past affects empirical results concerning interest rate smoothing, even in relatively rich models that include regime switching.
  • Table of Contents

    Datasets:

    • DS1: Dataset
Geographic Coverage
  • United States
Collection Mode
  • (1) The files submitted are 0411mdp.txt, program file, and 0411mdd.txt, the data file. (2) These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigators if further information is desired.

Availability
Delivery
This version of the study is no longer available on the web. If you need to acquire this version of the data, you have to contact ICPSR User Support (help@icpsr.umich.edu).
Alternative Identifiers
  • 1310 (Type: ICPSR Study Number)
Relations
  • Is previous version of
    DOI: 10.3886/ICPSR01310.v1
Publications
  • Dueker, Michael J., Rasche, Robert H.. Discrete Policy Changes and Empirical Models of the Federal Funds Rate. Federal Reserve Bank of St. Louis Review.86, (6), 61-72.2004.

Update Metadata: 2015-08-05 | Issue Number: 6 | Registration Date: 2015-06-15

Dueker, Michael J.; Rasche, Robert H. (2005): Discrete Policy Changes and Empirical Models of the Federal Funds Rate. Archival Version. Version: v0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/ICPSR01310