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Principal Investigator(s): Thornton, Daniel L., Federal Reserve Bank of St. Louis
It is commonly believed that the Fed's ability to control the federal funds rate stems from its ability to alter the supply of liquidity in the overnight market through open market operations. This paper uses daily data compiled by the author from the records of the Trading Desk of the Federal Reserve Bank of New York over the period March 1, 1984, through December 31, 1996. The author analyzes the Desk's use of its operating procedure in implementing monetary policy and the extent to which open market operations affect the federal funds rate-- the liquidity effect. The author finds that the operating procedure was used to guide daily open market operations. However, there is little evidence of a liquidity effect at the daily frequency and even less evidence at lower frequencies. Consistent with the absence of a liquidity effect, open market operations appear to be a relatively unimportant source of liquidity to the federal funds market.
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Thornton, Daniel L. Open Market Operations and the Federal Funds Rate. ICPSR21303-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2007-11-08. doi:10.3886/ICPSR21303.v1
Persistent URL: http://doi.org/10.3886/ICPSR21303.v1
This study was funded by:
- Federal Reserve Bank of St. Louis. Research Division
Scope of Study
Geographic Coverage: United States
Data Collection Notes:
(1) A zipped package contains an Excel file which comprises the data used to create the tables and figures used in the publication. (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.
Original ICPSR Release: 2007-11-08
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