Monetary Policy Operations: Theory, Evidence, and Tools for Quantitative Analysis

We formulate a quantitative dynamic equilibrium theory of trade in the fed funds market, calibrate it to fit a comprehensive set of marketwide and micro-level cross-sectional observations, and use it to make two contributions to the operational side of monetary policy implementation.First, we produce global structural estimates of the aggregate demand for reserves-a crucial decision-making input for modern central banks.Second, we propose diagnostic tools to gauge the central bank's ability to track a given fed funds target, and the heterogeneous incidence of policy actions on the shadow cost of funding across banks.