Discount rate policies of five Federal Reserve Chairmen

This paper investigates the discount rate policies of five Federal Reserve chairmen: Martin, Burns, Miller, Volcker and Greenspan. Both in terms of the reasons given for making discount rate changes and the frequency of discount rate changes, the discount rate policies of Martin and Greenspan were very similar, as were those of Burns and Volcker. The discount rate policy of Chairman Miller differed from either of these groups. Measured by the money market's response to discount rate changes, the discount rate policy of Burns and Volcker was the most effective and Miller's the least effective. Evidence is presented that suggests that the differential response is due to the fact that the discount rate policy of Burns and Volcker provided the market with more complete information than that of Martin and Greenspan. The evidence also supports critics of the Federal Reserve's discount rate policy prior to the early 1960s.Discount ; Board of Governors of the Federal Reserve System (U.S.)

Monetizing the debt

A more interesting and economically relevant definition of "monetizing the debt" is based on the Fed's motivation rather than its actions.Debt

What does the change in the FOMC's statement of objectives mean?

In contrast, most economists believe that central banks have little or no ability to directly affect employment. The effect of monetary policy actions on employment is indirect and stems from central banks’ ability to affect output growth in the short run and achieve price stability in the long run.Federal Open Market Committee ; Monetary policy ; Employment

Monetary policy at the zero bound

The average relationship between changes in the 10-year Treasury yield and changes in the funds rate over the 1987-2007 sample period is not indicative of the relationship between changes in the funds rate and changes in the 10-year Treasury yield that existed for more than a decade prior to the financial crisis.Monetary policy ; Interest rates

Lagged and contemporaneous reserve accounting: an alternative view

Bank reserves

The importance of an asymmetric directive

Federal Open Market Committee

"Measured pace" in the conduct of monetary policy

Monetary policy

Monetary policy: why money matters and interest rates don't

Monetary policy is now conducted by targeting a very short-term interest rate. The Fed and other central banks attempt to control the price level by manipulating aggregate demand by adjusting their interest rate target. At best, money's role is tertiary. Indeed, a few prominent and influential macroeconomists have suggested that money is not essential, or perhaps is irrelevant, for the determination of the price level. Against this backdrop, this paper argues that the essential feature of money is that it guarantees "final payment" and is essential for price determination. It also suggests that the ability of the central banks to control interest rates may be greatly exaggerated.Monetary policy

The lower and upper bounds of the Federal Open Market Committee's long-run inflation objective

It is widely acknowledged that the Fed can control the average inflation rate over a period of time reasonably well. Because of this and the Federal Open Market Committee's (FOMC's) long-standing commitment to price stability, the author argues that the FOMC has an implicit long-run inflation objective (LIO)-lower and upper bounds to the long-run inflation rate. He shows that the statements made by the FOMC in 2003 clarified the lower bound of its LIO and that the average of long-run inflation expectations responded by rising about 80 basis points. Moreover, consistent with reducing the market's uncertainty about the FOMC's LIO, long-run inflation expectations became more stable. The FOMC has recently been more specific about the upper bound of its LIO as well. The FOMC could eliminate the remaining uncertainty by establishing an explicit, numerical inflation objective.Federal Open Market Committee ; Inflation (Finance)

Testing the expectations hypothesis: some new evidence for Japan

The deregulation of the Japanese financial markets and the adoption of an interest rate policy instrument by the Bank of Japan prompted a number of empirical investigations of the expectation hypothesis (EH) of the term structures of interest rates in Japan. This paper is a continuation of this research. It deviates from the previous work on the EH in Japan in two respects. It tests the EH by estimating a general vector autoregression (VAR) of the long-term and short-term rates and testing the restrictions implied by the EH on the VAR using a Lagrange multiplier test. In addition, the issue of stationarity of interest rates is considered. The paper not only considers the possibility that Japanese interest rates are nonstationary, but analyzes the implications of non-stationarity for the EH.Monetary policy - Japan ; Interest rates - Japan