Replication data for: Rewriting Monetary Policy 101: What's the Fed's Preferred Post-Crisis Approach to Raising Interest Rates?

Summary:  View help for Summary For many years prior to the global financial crisis, the Federal Open Market Committee set a target for the federal funds rate and achieved that target through small purchases and sales of securities in the open market. In the aftermath of the financial crisis, with a superabundant level of reserve balances in the banking system having been created as a result of the Federal Reserve's large-scale asset purchase programs, this approach to implementing monetary policy will no longer work. This paper provides a primer on the Fed's implementation of monetary policy. We use the standard textbook model to illustrate why the approach used by the Federal Reserve before the financial crisis to keep the federal funds rate near the Federal Open Market Committee's target will not work in current circumstances, and explain the approach that the Committee intends to use instead when it decides to begin raising short-term interest rates.

JEL Classification:  View help for JEL Classification
      E43 Interest Rates: Determination, Term Structure, and Effects
      E52 Monetary Policy
      E58 Central Banks and Their Policies
      G01 Financial Crises