In 2002, the Federal Reserve began to set the discount rate above the federal funds rate, reversing its previous practice of keeping the discount rate below the funds rate To assess the impact, plot on a monthly basis from 1990 to 2007 the difference between the federal funds rate and the discount ...

Prior to 2002 the federal funds rate was below the discount rate but ...

In 2002, the Federal Reserve began to set the discount rate above the federal funds rate, reversing

Question:

In 2002, the Federal Reserve began to set the above the federal funds rate, reversing its previous practice of keeping the below the funds rate. To assess the impact, plot on a monthly basis from 1990 to 2007 the difference between the federal funds rate and the before (FRED codes: FEDFUNDS and MDISCRT) and after the policy shift (FRED codes: FEDFUNDS and WPCREDIT), using the same line color. On the right scale, plot the level of discount window borrowing (FRED code: DISCBORR). Did the new penalty rate for discount loans significantly diminish borrowing? What might account for thisresult?

In 2002, the Federal Reserve began to set the discount

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...