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To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-0084.2007.00496.x Byline: Selva Demiralp ([dagger]), Kevin D. Hoover ([double dagger]), Stephen J. Perez (s.) Keywords: C30; C32; C51 Abstract: Abstract Graph-theoretic methods of causal search based on the ideas of Pearl (2000), Spirtes et al. (2000), and others have been applied by a number of researchers to economic data, particularly by Swanson and Granger (1997) to the problem of finding a data-based contemporaneous causal order for the structural vector autoregression, rather than, as is typically done, assuming a weakly justified Choleski order. Demiralp and Hoover (2003) provided Monte Carlo evidence that such methods were effective, provided that signal strengths were sufficiently high. Unfortunately, in applications to actual data, such Monte Carlo simulations are of limited value, as the causal structure of the true data-generating process is necessarily unknown. In this paper, we present a bootstrap procedure that can be applied to actual data (i.e. without knowledge of the true causal structure). We show with an applied example and a simulation study that the procedure is an effective tool for assessing our confidence in causal orders identified by graph-theoretic search algorithms. Author Affiliation: ([dagger])Department of Economics, Koc University, Sariyer, Istanbul 34450, Turkey (e-mail:sdemiralp@ku.edu.tr) ([double dagger])Department of Economics, Duke University, 213 Social Science Building, Box 90097, Durham, NC 27708-0097, USA (e-mail:kd.hoover@duke.edu) (s.)Department of Economics, California State University, Sacramento, 6000 J Street, Sacramento, CA 95819-6082, USA (e-mail:sjperez@csus.edu) Article History: Final Manuscript Received: October 2007

In this paper, we argue that much of the research into the link between money and interest rates suffers from misspecification. The measure of money and the measure of interest rates are not always well matched. In examining the transmission of monetary policy, we show that using an appropriate measure of money, Federal Reserve balances, and the appropriate interest rate, the federal funds rate, a clear liquidity effect exists. Furthermore, we explain how a lack of a clear institutional understanding may have contributed to the finding of a 'liquidity puzzle' in the past. JEL codes: E43, E52, E58 Keywords: liquidity effect, federal funds market., ECONOMISTS OFTEN CONSIDER the first step in the transmission mechanism of monetary policy to be a shift in the 'money supply' that changes interest rates. Some authors (e.g., Reichenstein 1987, [...]

We use forecast errors made by the Federal Reserve while preparing open market operations to identify a liquidity effect at a daily frequency in the federal funds market. We find a liquidity effect on most days of the reserve maintenance period in addition to settlement day. The effect is nonlinear: large changes in supply more consistently have a measurable effect than do small changes. In addition, a higher aggregate level of reserve balances in the banking system is associated with a smaller liquidity effect during the maintenance period but a larger liquidity effect on the last days of the period. JEL codes: E43, E52, E58 Keywords: liquidity effect, federal funds market, open market operations., THE ABILITY OF the Federal Reserve to control the federal funds rate is taken for granted. Each morning, the trading desk (the Desk) at the Federal Reserve Bank of New [...]

Arbitrage apparent in overnight inter bank loan markets is studied. Brokered federal funds, non brokered federal funds and Eurodollars of the market are included for analysis.

In February 4, 1994 the Federal Reserve began the practice of announcing changes in the targeted level for the federal funds rate immediately after such decisions were made. This paper investigates to what extent the policy of 'the announcement' affected a key ingredient in the monetary transmission mechanism: the term structure of nominally risk-free, Treasury securities. We find that term rates react much more in unison during announcement days than at any other time. Moreover, the practice of circumscribing almost all changes in the federal funds rate target to Federal Open Market Committee (FOMC) meeting dates regiments the formation of market expectations in the overnight rate and the price discovery process of term rates, thus facilitating the Fed's goal of controlling long-term rates. JEL codes: E4, E5, C5 Keywords: announcement effect, term structure, rational expectations., Look, the main issue here is that, as far as I am concerned, I would like us to be counted. We are the central bank and we are making a [...]

The authors demonstrate the application of graph-theoretic techniques to choosing the structural vector autoregression causal order. These techniques are used in a Monte Carlo situation; findings show they are useful tools in structural vector autoregression analysis.