Timeliness and the Fed’s Daily Tactics

Recognizing that analysis of the daily activities have recently become a standard part of the monetary economics literature, this paper provides a detailed description of the Fed’s daily tactics from an institutionalist perspective. The three relevant categories of time in the Fed’s daily operations — daily, maintenance period, and seasonal — are described within the context of the institutional working rules giving rise to each category. This framework is used to explain recent events in monetary policy implementation. The final section of the paper illustrates how the discussion of time and timeliness in the Fed’s daily tactics can be used to inform research on traditional topics in monetary economics and argues that (1) the payments system, rather than reserve requirements, is the proper starting point for analysis of the Fed’s daily tactics; (2) there is no liquidity effect in the federal funds market; and (3) direct control over the monetary base is not possible.