Interest Rate Targeting and the Dynamics of Short-Term Rates

18 Pages Posted: 11 Nov 2008

See all articles by Pierluigi Balduzzi

Pierluigi Balduzzi

Boston College - Carroll School of Management

Giuseppe Bertola

Centre for Economic Policy Research (CEPR); Università di Torino - Dip. di Economia e Statistica

Silverio Foresi

Goldman Sachs Group, Inc. - Quantitative Strategy Group

Multiple version iconThere are 4 versions of this paper

Date Written: December 1994

Abstract

We explore the link between the overnight fed funds rate, which is actively targeted by the Federal Reserve, and longer-maturity term fed funds rates. We develop a term-structure model which explicitly accounts for interest rate targeting and for the predictability of future target changes. The model is able to replicate some qualitative features of the dynamic behavior of deviations of short-term rates from the target.

Keywords: fed funds rates, expectation hypothesis, autocovariance functions

Suggested Citation

Balduzzi, Pierluigi and Bertola, Giuseppe and Foresi, Silverio, Interest Rate Targeting and the Dynamics of Short-Term Rates (December 1994). NYU Working Paper No. FIN-94-011, Available at SSRN: https://ssrn.com/abstract=1298814

Pierluigi Balduzzi (Contact Author)

Boston College - Carroll School of Management ( email )

Department of Finance
140 Commonwealth Avenue - Fulton Hall 438
Chestnut Hill, MA 02467
United States
617-552-3976 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://www.bc.edu/bc_org/avp/csom/faculty/

Giuseppe Bertola

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Università di Torino - Dip. di Economia e Statistica ( email )

Lungo Dora Siena 100
Torino, 10153
Italy
+39 011 670 4405 (Phone)

HOME PAGE: http://https://sites.google.com/site/gipbert

Silverio Foresi

Goldman Sachs Group, Inc. - Quantitative Strategy Group ( email )

32 Old Slip, 24th Floor
New York, NY 10005
United States
(212) 357-3508 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
55
Abstract Views
613
rank
2,283
PlumX Metrics