Operating Procedures and the Expectations Theory of the Term Structure of Interest Rates: A Note on the New Zealand Experience from 1989 to 2008
AbstractThe operating procedure of a central bank influences in no small measure whether the behavior of interest rates is consistent with the expectations hypothesis. In New Zealand, the predictive content of the term spread improves markedly in the wake of the switch from a quantity-based to a price-based operating procedure in March 1999. The Official Cash Rate system has made it easier for market participants to understand the day-to-day conduct of monetary policy. As a result, market interest rates have become more predictable, thereby contributing to the success of the expectations hypothesis in explaining the behavior of yields on very short-dated financial instruments.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 10/72.
Length: 19 pages
Date of creation: 01 Nov 2010
Date of revision:
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Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-27 (All new papers)
- NEP-CBA-2010-11-27 (Central Banking)
- NEP-MAC-2010-11-27 (Macroeconomics)
- NEP-MON-2010-11-27 (Monetary Economics)
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