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Transparency, Disclosure, and the Federal Reserve

Author

Listed:
  • Michael Ehrmann
  • Marcel Fratzscher

    (European Central Bank)

Abstract

This paper provides an assessment of central bank transparency for the efficiency of monetary policy implementation, using the introduction of balance-of-risks assessments by the Federal Reserve as a testing device. We find that markets anticipated monetary policy decisions equally well under this new disclosure regime as before, but arrived at their expectations differently. Now, markets extract information from the statements, whereas before, they reverted to other types of Federal Reserve communication in the intermeeting periods. These findings suggest that the Federal Reserve’s new disclosure practice may have improved transparency, as information is now released at an earlier time and with clearer signals.

Suggested Citation

  • Michael Ehrmann & Marcel Fratzscher, 2007. "Transparency, Disclosure, and the Federal Reserve," International Journal of Central Banking, International Journal of Central Banking, vol. 3(1), pages 179-225, March.
    • Handle: RePEc:ijc:ijcjou:y:2007:q:1:a:6
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    More about this item

    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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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