Forecasting the Treasury's balance at the Fed
Article first published online: 13 AUG 2004
Copyright © 2004 John Wiley & Sons, Ltd.
Journal of Forecasting
Volume 23, Issue 5, pages 357–371, August 2004
How to Cite
Thornton, D. L. (2004), Forecasting the Treasury's balance at the Fed. J. Forecast., 23: 357–371. doi: 10.1002/for.920
- Issue published online: 13 AUG 2004
- Article first published online: 13 AUG 2004
- open market operations;
- Treasury balance;
- federal funds rate
As part of the Fed's daily operating procedure, the Federal Reserve Bank of New York, the Board of Governors and the Treasury make a forecast of that day's Treasury balance at the Fed. These forecasts are an integral part of the Fed's daily operating procedure. Errors in these forecasts can generate variation in reserve supply and, consequently, the federal funds rate. This paper evaluates the accuracy of these forecasts. The evidence suggests that each agency's forecast contributes to the optimal, i.e., minimum variance, forecast and that the Trading Desk of the Federal Reserve Bank of New York incorporates information from all three of the agency forecasts in conducting daily open market operations. Moreover, these forecasts encompass the forecast of an economic model. Copyright © 2004 John Wiley & Sons, Ltd.