Richard G. Sheehan offers some evidence on the extent to which the Federal Reserve has altered monetary policy in response to federal deficits. The relationships between the deficit, the money stock and interest rates depend on the nature of the deficit and the targeting procedures used by the Federal Reserve. The author uses a simple model to show that a policy-induced or structural deficit may lead to higher interest rates under a monetary aggregate targeting strategy or to higher money growth under an interest rate targeting strategy. In contrast, a cyclical deficit, induced by a recession for example, will be accompanied by lower interest rates or slower money growth. Using a reaction function approach, Sheehan finds evidence that structural deficits led to higher money growth before 1971 when the Federal Reserve targeted interest rates. Since then, the Federal Reserve has, at least in part, focused on a monetary aggregate target, and there is no evidence that money growth has been influenced by structural deficits. Further, there is no evidence suggesting that higher structural deficits have increased interest rates over any period.