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Open market operations and associated movements of the federal funds rate during the week prior to target changes

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  • Yasuo Nishiyama

    (Woodbury University)

Abstract

This paper estimates the conduct of open market operations during the week prior to a change in the federal funds target rate over 1994–2005. The paper finds evidence that the Federal Reserve conducted either no or partial accommodation most of the time when target changes were plus/minus 25 basis points, whereas it conducted anti-accommodation when target changes were plus/minus 50 basis points or larger. Observed, and well-documented, movements of the federal funds rate—away from the existing target level and toward an expected new target level during the week prior to a target change—are consistent with these open market operations. An exception is the 1994–2001 period during which the Federal Reserve most likely conducted complete accommodation, thereby keeping the federal funds rate at the existing target, when target changes were minus 25 basis points.

Suggested Citation

  • Yasuo Nishiyama, 2017. "Open market operations and associated movements of the federal funds rate during the week prior to target changes," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(4), pages 806-828, October.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:4:d:10.1007_s12197-016-9380-8
    DOI: 10.1007/s12197-016-9380-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Open market operations; Accommodation; Federal funds target rate; Reserve demand; Market expectations;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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