This article examines the dynamic relationship between two key U.S. money market interest rates - the federal funds rate and the 3-month Treasury bill rate. Using daily data over the period 1974 to 1999, we find a long-run relationship between these two rates that is remarkably stable across...

As the IOER rate increases, less money will be given to the Treasury and more will be given to banks for the sole purpose of holding excess reserves (i.e., idle deposits at Federal Reserve Banks).

If investment spending is sufficiently insensitive to interest rate changes and the effect of Fed actions on interest rates is sufficiently weak, the net effect of the persistent zero interest rate policy could be negative.

The marked rise in longer-term rates is reflected in a rise in both real rates and expectations for inflation.