Soft versus hard targets for exchange rate intervention
In: Economic policy, Band 12, Heft 24, S. 13-52
ISSN: 1468-0327
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In: Economic policy, Band 12, Heft 24, S. 13-52
ISSN: 1468-0327
In: NBER Working Paper No. w5727
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Working paper
In: Ricerche economiche, Band 48, Heft 1, S. 1-22
ISSN: 0035-5054
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In: IMF Working Paper, S. 1-30
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In: IMF Working Paper, S. 1-23
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In: IMF Working Paper, S. 1-34
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In: IMF Working Paper, S. 1-32
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In: Journal of Monetary Economics, Band 30, Heft 3, S. 373-408
In: IMF Working Paper, S. 1-54
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In: IMF Working Paper, S. 1-38
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We propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements, and study the interaction of profit-maximizing banks with a central bank targeting interest rates at high frequency. The model yields predictions on biweekly patterns of the federal funds rate's volatility and on its response to changes in target rates and in intervention procedures, such as those implemented by the Fed in 1994. Theoretical results are consistent with empirical patterns of interest rate volatility in the U.S. market for federal funds
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We use daily data on bank reserves and overnight interest rates to document a striking pattern in the high-frequency behavior of the U.S. market for federal funds: depository institutions tend to hold more reserves during the last few days of each reserve maintenance period, when the opportunity cost of holding reserves is typically highest. We then propose and analyze a model federal funds market where uncertain liquidity flows transaction costs induce banks to delay trading bid up interest rates at end each period. In this context, central bank's interest-rate-smoothing policy causes high supply liquid be associated with around settlement days.
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In: IMF Working Paper, S. 1-35
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