Whither the Liquidity Effect: The Impact of Federal Reserve Open Market Operations in Recent Years

Posted: 2 Jul 2021

See all articles by Ruth Judson

Ruth Judson

Board of Governors of the Federal Reserve System

Elizabeth C. Klee

affiliation not provided to SSRN

Date Written: 2009

Abstract

Previous research indicated that the daily liquidity effect, or the change in the federal funds rate associated with an exogenous change in Fed balances, varies with several factors including the day of the maintenance period. In this paper, we examine the data over the recent period of increased Federal Reserve transparency and find that the liquidity effect stabilized across days of the maintenance period. Rather, the liquidity effect may be a function of the uncertainty about banks' end-of-day balances. Moreover, we find that increased transparency led to a larger liquidity effect on the days prior to an FOMC meeting.

Suggested Citation

Judson, Ruth A. and Klee, Elizabeth C., Whither the Liquidity Effect: The Impact of Federal Reserve Open Market Operations in Recent Years (2009). FEDS Working Paper No. 2009-25, Available at SSRN: https://ssrn.com/abstract=3876925

Ruth A. Judson (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Elizabeth C. Klee

affiliation not provided to SSRN

No Address Available

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