IDEAS home Printed from https://ideas.repec.org/a/mcb/jmoncb/v19y1987i4p425-36.html
   My bibliography  Save this article

Secrecy of Monetary Policy and the Variability of Interest Rates

Author

Listed:
  • Tabellini, Guido

Abstract

This paper addresses the issue of how secrecy of the short-run monetary policy objectives affects the behavior of the federal-funds rate. Secrecy is modeled by assuming that financial markets are unc ertain about a parameter in the Federal Reserve reaction function. Th ey learn over time about this parameter, by means of Bayes rule, and this learning process is reflected in the time path of interest rates and of reserve aggregates. The main result of the paper is that secr ecy tends to increase the volatility of the funds rate and of reserve aggregates. Copyright 1987 by Ohio State University Press.

Suggested Citation

  • Tabellini, Guido, 1987. "Secrecy of Monetary Policy and the Variability of Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(4), pages 425-436, November.
  • Handle: RePEc:mcb:jmoncb:v:19:y:1987:i:4:p:425-36
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-2879%28198711%2919%3A4%3C425%3ASOMPAT%3E2.0.CO%3B2-Z&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marvin Goodfriend, 1986. "A weekly rational expectations model of the nonborrowed reserve operating procedure," Economic Review, Federal Reserve Bank of Richmond, issue Jan, pages 11-28.
    2. Cyert, Richard M & DeGroot, Morris H, 1974. "Rational Expectations and Bayesian Analysis," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 521-536, May/June.
    3. McCallum, Bennett T., 1983. "On non-uniqueness in rational expectations models : An attempt at perspective," Journal of Monetary Economics, Elsevier, vol. 11(2), pages 139-168.
    4. Shiller, Robert J, 1979. "The Volatility of Long-Term Interest Rates and Expectations Models of the Term Structure," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1190-1219, December.
    5. Tabellini, Guido, 1988. "Learning and the volatility of exchange rates," Journal of International Money and Finance, Elsevier, vol. 7(2), pages 243-250, June.
    6. Michael Dotsey, 1985. "Monetary policy, secrecy, and federal funds rate behavior," Working Paper 85-04, Federal Reserve Bank of Richmond.
    7. V. Vance Roley & Carl E. Walsh, 1985. "Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 1011-1039.
    8. Cukierman, Alex & Meltzer, Allan H, 1986. "A Theory of Ambiguity, Credibility, and Inflation under Discretion and Asymmetric Information," Econometrica, Econometric Society, vol. 54(5), pages 1099-1128, September.
    9. Nichols, Donald A & Small, David H & Webster, Charles E, Jr, 1983. "Why Interest Rates Rise When an Unexpectedly Large Money Stock Is Announced," American Economic Review, American Economic Association, vol. 73(3), pages 383-388, June.
    10. Marvin Goodfriend & Gary S. Anderson & Anil K. Kashyap & George R. Moore & Richard D. Porter, 1984. "A weekly perfect foresight model of the nonborrowed reserve operating procedure," Working Paper 84-04, Federal Reserve Bank of Richmond.
    11. LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-574, May.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:19:y:1987:i:4:p:425-36. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.