A Model of the Federal Funds Rate Target

Bibliographic Data

ID10171191
AuthorsJames D Hamilton (0000-0001-5041-1279, University of California San Diego), Òscar Jordà (0000-0002-9588-2354, University of California, Davis)
Year2002
Volume110
Issue5
Pages1135-1167
Publication date2002-09-27
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/341872
OpenAlexW3122500406
LanguageEN
Citations received7
References cited24

This paper is a statistical analysis of the manner in which the Federal Reserve determines the level of the federal funds rate target, one of the most publicized and anticipated economic indicators in the financial world. The paper introduces new statistical tools for forecasting a discrete-valued time series such as the target and suggests that these methods, in conjunction with a focus on the institutional details of how the target is determined, can significantly improve on standard vector autoregression forecasts of the effective federal funds rate. We further show that the news that the Fed has changed the target has statistical content substantially different from the news that the Fed failed to make an anticipated target change, causing us to challenge some of the conclusions drawn from standard linear VAR impulse-response functions

Econometrics · Economics · Federal funds · Impulse response · Monetary economics · Monetary policy · Statistical analysis · Statistical model · Statistics · Vector autoregression · Artificial Intelligence · Computer Science · Economic theories and models · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact

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