Federal Reserve Policy, Interest Rate Volatility, and the U.S. Capital Raising Mechanism
48 Pages Posted: 23 Apr 2004 Last revised: 6 Jul 2022
Date Written: June 1982
Abstract
The evidence presented in this paper leads to three conclusions about possible effects on the U.S. long-term capital. raising mechanism due to the sharp increase in interest rate volatility that has followed the Federal Reserve System's adoption of new monetary policy procedures in 1979. First, the increased volatility has probably led nonfinancial corporations to finance less of their external funds requirements at long term than they would other- wise have done. Second, the increased volatility has probably led underwriters of high grade corporate bonds to increase the spread of a typical new issue's yield over the prevailing market yield on comparable bonds already outstanding. Third, there is little firm basis (reported here, anyway) to conclude that the increased volatility in particular has affected investors' portfolio behavior in the bond market.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Risk Premium on Italian Government Debt, 1976-88
By Carlo Cottarelli and Mauro Mecagni
-
A Note on the Derivation of Linear Homogeneous Asset Demand Functions
-
A Test of Portfolio Crowding-Out and Related Issues in Finance
-
Crowding Out or Crowding in? Evidence on Debt-Equity Substitutability
-
Who Puts the Inflation Premium into Nominal Interests Rates?
-
Price Inflation, Portfolio Choice, and Nominal Interest Rates