Department of Economics2024-11-0920060022-287910.1353/mcb.2006.00512-s2.0-33745967728http://dx.doi.org/10.1353/mcb.2006.0051https://hdl.handle.net/20.500.14288/12644We use forecast errors made by the Federal Reserve while preparing open market operations to identify a liquidity effect at a daily frequency in the federal funds market. We find a liquidity effect on most days of the reserve maintenance period in addition to settlement day. The effect is nonlinear; large changes in supply more consistently have a measurable effect than do small changes. In addition, a higher aggregate level of reserve balances in the banking system is associated with a smaller liquidity effect during the maintenance period but a larger liquidity effect on the last days of the period.BusinessFinanceEconomicsJournal Article1538-4616238366300003Q31452