کاهش ذخایر مورد نیاز، نوسانات نرخ وجوه و عملیات بازار آزاد

The standard view of the monetary transmission mechanism rests on the central bank's ability to manipulate the overnight interest rate by controlling reserve supply. In the 1990s, there was a significant decline in the level of reserve balances in the US accompanied at first by an increase in federal funds rate volatility. However, following this initial rise, volatility declined. In this paper, we find evidence of structural breaks in volatility. We estimate a Tobit model of temporary open market operations and conclude that there have been changes in the Desk's reaction function that played a major role in controlling volatility.

Monetary policy is implemented on a daily basis mainly through open market operations (OMOs) carried out by the Domestic Trading Desk (the Desk) at the Federal Reserve Bank of New York. These operations are used to bring the supply of balances at the Federal Reserve in line with the demand for them at an interest rate (the federal funds rate) near the level specified by the Federal Open Market Committee (FOMC). Movements in the funds rate then affect the real economy through the monetary or credit channels of the monetary transmission mechanism. Over time, the Desk has had to adapt to structural changes in the supply of, or demand for, reserve balances. The change addressed in this paper is the decline in reserve requirements since the early 1990s that led to lower demands for Fed balances. We find that low required balances brought about a changed daily pattern of demand for balances and caused an adjustment in Desk behavior to limit the size of deviations of the funds rate from the FOMC target.

In this paper, we estimate the Desk's reaction function over different sample periods to provide evidence that changes in the implementation of OMOs have played a significant role in explaining why funds rate volatility has declined and remained low even as required balances have trended down since 1990. From the wide variety of factors influencing OMOs, we choose several that seem important in determining the size of temporary operations. They include “seasonal” effects from particular days of the maintenance period and indicators of pressure arising from reserve demand. Our findings indicate that the Desk has tailored its operations to address the changed pattern of demand that has been associated with lower reserve requirements.