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Market-Based Monetary Policy Transparency Index, Risk and Volatility - The Case of the United States

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Author Info
Amir Kia () (Department of Finance and Economics, Utah Valley University)
Hilde Patron () (Department of Economics and Finance, Louisiana Tech University)
Abstract

This paper extends the literature by developing an objective market-based index, which is dynamic and continuous and can be used to measure the monetary policy transparency for a country or, simultaneously, a series of countries. It was found that the more transparent the monetary policy is, the less risky and volatile the money market will be. Furthermore, during the tenure of Chairman Greenspan the volatility and risk in the money market fell. The policy regime changes of adjusting the target rate by multiples of 25 or 50 basis points and including a balance-of-risks sentence in FOMC statements also resulted in a reduction in volatility in the money markets.

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Publisher Info
Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 04-07.

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Length: 40 pages
Date of creation: 01 Apr 2004
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Publication status: Published: Carleton Economic Paper
Handle: RePEc:car:carecp:04-07

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Related research
Keywords: Monetary policy transparency; risk; volatility; money market;

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marc-André Gosselin, 2007. "Central Bank Performance under Inflation Targeting," Working Papers 07-18, Bank of Canada. [Downloadable!]
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