The Federal Funds Rate and the Channels of Monetary Transnission

First, we sini tint the Interest rate on Feleral fuels is extrenely informative atciut future ncverents of real macroannnlc variables, sore so than nnnetary aggregates or other interest rates. Next, we argue that the reason for this foreastin ss i tji the fist rate sensitively rrds shocks to the sztly of (mDt the dananl for) bank reserves, i.e. the tunis rate is a goal irdicator of nzmtary policy acticr. Finally, using iniriaticris to the fuels rate as a neas.ire of dwqes in ucinetazy policy, we present evidejre onrisistent with the via that nerEtary policy werks at least in part thra4i "crelit" (that is, bait loans) as well as thn4i "enney" (that is, bank dOeJS) -even thc*sgh bank loans fail tn Granger-cause real variables.

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