The federal funds rate and the channels of monetary transmission

Ben S. Bernanke, Alan S. Blinder

Research output: Contribution to journalArticlepeer-review

1593 Scopus citations


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).

Original languageEnglish (US)
Pages (from-to)901-921
Number of pages21
JournalAmerican Economic Review
Issue number4
StatePublished - 1992

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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