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Financial Market Responses To Monetary Policy Changes In The 1990s

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  • Thomas Urich
  • Paul Wachtel

Abstract

The operating target for monetary policy in the United States has changed from borrowings in the late 1980s to a target range for the fed funds rate to a specific fed funds target. In addition, secrecy about the policy target has largely disappeared, and since 1994 policy targets have been announced immediately. This article explores the impact of policy decisions on short‐term interest rates as the policy announcements have changed. The authors find that the policy changes had a larger impact when the Fed moved to a specific emphasis on the fed funds rate. However, since the Fed began to announce the targets, policy changes have had a lesser effect on rates.

Suggested Citation

  • Thomas Urich & Paul Wachtel, 2001. "Financial Market Responses To Monetary Policy Changes In The 1990s," Contemporary Economic Policy, Western Economic Association International, vol. 19(3), pages 254-267, July.
    • Handle: RePEc:bla:coecpo:v:19:y:2001:i:3:p:254-267
    DOI: 10.1093/cep/19.3.254
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    References listed on IDEAS

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    4. Balduzzi, Pierluigi & Bertola, Giuseppe & Foresi, Silverio, 1997. "A model of target changes and the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 223-249, July.
    5. Urich, Thomas & Wachtel, Paul, 1981. "Market Response to the Weekly Money Supply Announcements in the 1970s," Journal of Finance, American Finance Association, vol. 36(5), pages 1063-1072, December.
    6. Cook, Timothy & Hahn, Thomas, 1989. "The effect of changes in the federal funds rate target on market interest rates in the 1970s," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 331-351, November.
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