This paper by Ben Bernanke and Alan Blinder examines the effectiveness of the Federal Funds Rate as a predictor of real macroeconomic variables and its role in monetary policy transmission. The authors argue that the Federal Funds Rate is a superior predictor of economic variables compared to monetary aggregates and other interest rates. They attribute this success to the rate's sensitivity to shocks to the supply of bank reserves, which reflects monetary policy actions. Using innovations in the Federal Funds Rate as a measure of policy changes, they find evidence that monetary policy affects the real economy through both "credit" (bank loans) and "money" (bank deposits). The study also suggests that loans respond slowly to policy changes but eventually align closely with changes in the unemployment rate, supporting the idea that loans play a significant role in transmitting monetary policy. The authors conclude that the Federal Funds Rate is a reliable indicator of monetary policy and that monetary policy does indeed influence the real economy.This paper by Ben Bernanke and Alan Blinder examines the effectiveness of the Federal Funds Rate as a predictor of real macroeconomic variables and its role in monetary policy transmission. The authors argue that the Federal Funds Rate is a superior predictor of economic variables compared to monetary aggregates and other interest rates. They attribute this success to the rate's sensitivity to shocks to the supply of bank reserves, which reflects monetary policy actions. Using innovations in the Federal Funds Rate as a measure of policy changes, they find evidence that monetary policy affects the real economy through both "credit" (bank loans) and "money" (bank deposits). The study also suggests that loans respond slowly to policy changes but eventually align closely with changes in the unemployment rate, supporting the idea that loans play a significant role in transmitting monetary policy. The authors conclude that the Federal Funds Rate is a reliable indicator of monetary policy and that monetary policy does indeed influence the real economy.