Derivatives activity and monetary policy
Trading in futures and options on short-term interest rates has grown rapidly since the turn of the millennium. This feature provides some econometric evidence on the relationship between turnover in this market and changes in policy rates, both actual and expected. The volume of trading in exchange-traded money market derivatives appears to respond mainly to changes in expectations of future interest rates, which is in line with evidence suggesting that monetary policy has become more transparent and predictable relative to the 1980s and early 1990s. Increased uncertainty about future central bank actions is also associated with higher turnover.
Volume (Year): (2006)
Issue (Month): (September)
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- Refet S. Gürkaynak & Brian P. Sack & Eric T. Swanson, 2002.
"Market-based measures of monetary policy expectations,"
Finance and Economics Discussion Series
2002-40, Board of Governors of the Federal Reserve System (U.S.).
- Gurkaynak, Refet S. & Sack, Brian T. & Swanson, Eric P., 2007. "Market-Based Measures of Monetary Policy Expectations," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 201-212, April.
- Refet S. Gürkaynak & Brian P. Sack & Eric T. Swanson, 2006. "Market-based measures of monetary policy expectations," Working Paper Series 2006-04, Federal Reserve Bank of San Francisco.
- Harris, Milton & Raviv, Artur, 1993. "Differences of Opinion Make a Horse Race," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 473-506.
- Shalen, Catherine T, 1993. "Volume, Volatility, and the Dispersion of Beliefs," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 405-34.
- David Laster & Paul Bennett & In Sun Geoum, 1999. "Rational Bias in Macroeconomic Forecasts," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 293-318.
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