Fed blog post tests theory on Fed Funds rate and short-term Treasury supply

Explaining the Puzzling Behavior of Short-Term Money Market Rates
Antoine Martin, James J. McAndrews, Ali Palida, and David Skeie

Since 2008, the Federal Reserve has dramatically increased the supply of bank reserves, effectively adopting a floor system for monetary policy implementation. Since then, the behavior of short-term money market rates has been at times puzzling. In particular, short-term rates have been surprisingly firm in recent months, despite the large increase in reserves by the Fed as a part of its response to the coronavirus pandemic. In this post, we provide evidence that both the supply of reserves and the supply of short-term Treasury securities are important factors for explaining short-term rates.

The post is available at https://libertystreeteconomics.newyorkfed.org/2020/08/explaining-the-puzzling-behavior-of-short-term-money-market-rates.html

Related Posts

Previous Post
Paper: The Collateral Supply Effect on Central Bank Policy
Next Post
ISLA publishes 13th Securities Lending Market Report

Related Posts

Fill out this field
Fill out this field
Please enter a valid email address.

Menu
X

Reset password

Create an account