TY  - JOUR
AU  - Balduzzi,Pierluigi
AU  - Bertola,Giuseppe
AU  - Foresi,Silverio
AU  - Klapper,Leora
TI  - Interest Rate Targeting and the Dynamics of Short-Term Rates
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5944
PY  - 1997
Y2  - February 1997
UR  - http://www.nber.org/papers/w5944
L1  - http://www.nber.org/papers/w5944.pdf
N1  - Author contact info:
Pierluigi Balduzzi
Finance Department
Boston College
Fulton Hall 438
140 Commonwealth Avenue
Chestnut Hill, MA 02467
Tel: 617/552-3976
Fax: 617/552-3985
E-Mail: pierluigi.balduzzi.1@bc.edu

Giuseppe Bertola
Dipartimento di Economia, Università di Torino
Via Po 53
I-10124 Torino
Italy
E-Mail: giuseppe.bertola@unito.it

Silverio Foresi
Salomon Smith Barney
Emerging Markets Derivatives and
Structured Products
388 Greenwich Street
11th Floor
New York, NY  10013

Leora F. Klapper
The World Bank
1818 H Street, NW
Washington, DC 20433
Tel: 202/473-8738
E-Mail: lklapper@worldbank.org
AB  - We find that in 1989-1996, when U.S. monetary policy tightly targeted overnight fed funds rates, the volatility and persistence of spreads between target and term fed funds levels were larger for longer-maturity loans.  We show that such patterns are consistent with an expectational model where target revisions are infrequent and predictable.  In our model, the (autoco-) variance of the spreads of term fed funds rates from the target increases with maturity because longer-term rates are more heavily influenced by persistent expectations of future target changes.
ER  -