Assessing Monetary Policy Effects Using Daily Fed Funds Futures Contracts / James D. Hamilton.

Format:

Book

Author/Creator:

Hamilton, James D.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13569.

NBER working paper series no. w13569

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

This paper develops a generalization of the formulas proposed by Kuttner (2001) and others for purposes of measuring the effects of a change in the fed funds target on Treasury yields of different maturities. The generalization avoids the need to condition on the date of the target change and allows for deviations of the effective fed funds rate from the target as well as gradual learning by market participants about the target. The paper shows that parameters estimated solely on the basis of the behavior of the fed funds and fed funds futures can account for the broad calendar regularities in the relation between fed funds futures and Treasury yields of different maturities. Although the methods are new, the conclusion is quite similar to that reported by earlier researchers-- changes in the fed funds target seem to be associated with quite large changes in Treasury yields, even for maturities up to ten years.

Notes:

Print version record

November 2007.