The Impact of Banks’ Cumulative Reserve Position on Federal Funds Rate Behavior
by Spence Hilton and Warren B. Hrung
Federal Reserve Bank of New York
We analyze the impact that reserve levels accumulated through the preceding day in a reserve maintenance period have on the level of the federal funds rate each morning prior to when open-market operations are arranged. Our empirical results and other evidence provided about intraday patterns of the federal funds rate demonstrate that the pace at which reserves are supplied over a maintenance period to meet banks’ total reserve requirements is an important determinant of federal funds rate behavior.
JEL Codes: E5, G21.
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