NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Money Announcements, the Demand for Bank Reserves and the Behavior of the Federal Funds Rate Within the Statement Week

John Y. Campbell

NBER Working Paper No. 1806 (Also Reprint No. r0863)
Issued in 1986
NBER Program(s):   ME

The effect of money stock announcements on the Federal funds rate has been attributed informally to the information conveyed by the announcements about aggregate reserve demand. This "Aggregate Information Hypothesis" explains the effect without reference to Federal Reserve intervention in the funds market. In this paper I provide a formal model of the Aggregate Information Hypothesis under lagged reserve accounting.The model relies on imperfect information in the funds market, and on imperfect bank arbitrage of reserve demand between days of the week. Some stylized facts are presented about funds rate behavior in the period 1980-1983.

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Document Object Identifier (DOI): 10.3386/w1806

Published: From Journal of Money, Credit and Banking, Vol. 19, No. 1, pp. 56-67,(February 1987).

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