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

By:

Hamilton, James D

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w13569.Publication details: Cambridge, Mass. National Bureau of Economic Research 2007.Description: 1 online resource: illustrations (black and white)Subject(s):

E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: 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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w13569 (Browse shelf(Opens below))	Not For Loan

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November 2007.

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.