Abstract
Cook and Hahn (1988) have argued that discount rate change announcements were used by the Federal Reserve to signal market participants about movements in the federal funds rate throughout the 1973-79 federal funds rate targeting period. They maintained that announced changes in the discount rate provided new information to market participants about subsequent actions of the Federal Reserve regarding the federal funds rate. Market participants understood these signals and used them to revise their expectations of the future path of the funds rate which also affected Treasuw bill rates. However, Roley and Troll (1984) and Smirlock and Yawitz (1985) have argued that the Federal Reserve chose to implement policy changes exclusively through the federal funds rate during the funds rate targeting period. Hence the Federal Reserve's discount rate policy did not reveal any additional information and thus did not have an effect on market interest rates. Cook and Hahn (1988) found evidence of discount rate announcement effects on bill rates in the pre-October 1979 funds rate operating period while both Roley and Troll and Smirlock and Yawitz did not. These three studies differed in several ways including their discount rate announcement classification procedures, l mistiming of five event days,2 and diSerent sample starting dates.3 As Cook and Hahn (1988, Table 1, pp. 170-171) published
Published Version
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