Federal Reserve Policy, Interest Rate Volatility, and the U.S. Capital Raising Mechanism / Benjamin M. Friedman.

Format:

Book

Author/Creator:

Friedman, Benjamin M.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0917.

NBER working paper series no. w0917

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1982.

Summary:

The evidence presented in this paper leads to three conclusions about possible effects on the U.S. long-term capital. raising mechanism due to the sharp increase in interest rate volatility that has followed the Federal Reserve System's adoption of new monetary policy procedures in 1979. First, the increased volatility has probably led nonfinancial corporations to finance less of their external funds requirements at long term than they would other- wise have done. Second, the increased volatility has probably led underwriters of high grade corporate bonds to increase the spread of a typical new issue's yield over the prevailing market yield on comparable bonds already outstanding. Third, there is little firm basis (reported here, anyway) to conclude that the increased volatility in particular has affected investors' portfolio behavior in the bond market.

Notes:

Print version record

June 1982.