In this paper, we assess the effects of changes to the primarycredit facility since August 2007 by performing out-of-samplesimulations based on a model developed by Artuç andDemiralp (2008). Our results are highly consistent with thepredictions of our 2008 study—that is, the revised...

The textbook view of the monetary transmissionmechanism rests on the central bank’s ability tomanipulate the overnight interest rate by controlling thereserve supply, followed by a rational-expectations mechanismthat ensures that movements in the overnight rate reverberateinto longer maturity...