The federal funds rate and the channels of monetary transmission

TY - JOUR

T1 - The federal funds rate and the channels of monetary transmission

AU - Bernanke, Ben S.

AU - Blinder, Alan S.

PY - 1992/1/1

Y1 - 1992/1/1

N2 - We show that the interest rate on Federal funds is extremely informative about future movements of real macroeconomic variables. Then we argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves; that is, the funds rate is a good indicator of monetary policy actions. Finally, using innovations to the funds rate as a measure of changes in policy, we present evidence consistent with the view that monetary policy works at least in part through "credit" (i.e., bank loans) as well as through "money" (i.e., bank deposits). (JEL E52).

AB - We show that the interest rate on Federal funds is extremely informative about future movements of real macroeconomic variables. Then we argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves; that is, the funds rate is a good indicator of monetary policy actions. Finally, using innovations to the funds rate as a measure of changes in policy, we present evidence consistent with the view that monetary policy works at least in part through "credit" (i.e., bank loans) as well as through "money" (i.e., bank deposits). (JEL E52).

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M3 - Article

AN - SCOPUS:85016834058

SN - 0002-8282

VL - 82

SP - 901

EP - 921

JO - American Economic Review

JF - American Economic Review

IS - 4

ER -