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Central Banks and Market Interest Rates

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  • Iris Biefang-Frisancho Mariscal
  • Peter Howells

Abstract

In a world of endogenous money, the central bank’s role in monetary policy is reduced to the setting of a very short-term official rate of interest, which indicates the price at which it will make liquidity available to the banking system. However; it is changes in market rates that affect behavior; and so the ability of the central bank to influence anything at all depends, first, on the interaction between official and market rates. In this paper; we use a vector autogressive error correction model to explore the response to changes in the central bank rate of three short-term market rates that have beenfeatured previously in this journal in debates about the demand for endogenous money.

Suggested Citation

  • Iris Biefang-Frisancho Mariscal & Peter Howells, 2002. "Central Banks and Market Interest Rates," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 24(4), pages 569-585, July.
    • Handle: RePEc:mes:postke:v:24:y:2002:i:4:p:569-585
    DOI: 10.1080/01603477.2002.11490344
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    References listed on IDEAS

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    1. Claudio E. V. Borio, 1997. "Monetary policy operating procedures in industrial countries," BIS Working Papers 40, Bank for International Settlements.
    2. Dale, Spencer & Haldane, Andrew G, 1998. "Interest Rate Control in a Model of Monetary Policy," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(3), pages 354-375, June.
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    9. Cook, Timothy & Hahn, Thomas, 1989. "The effect of changes in the federal funds rate target on market interest rates in the 1970s," Journal of Monetary Economics, Elsevier, vol. 24(3), pages 331-351, November.
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    Citations

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    Cited by:

    1. John K. Ashton, 2007. "Synchronisation and Staggering of Deposit Account Interest Rate Changes," Working Papers 07-14, Centre for Competition Policy, University of East Anglia.
    2. Edwin Le Héron, 2004. "From the Canadian Experiment of the 1990's: A New Consensus on Monetary Policy," Post-Print halshs-00159897, HAL.
    3. Toporowski, Jan, 2006. "Open market operations : beyond the new consensus," Research Discussion Papers 14/2006, Bank of Finland.
    4. repec:zbw:bofrdp:2006_014 is not listed on IDEAS
    5. Jack R. Rogers, 2013. "Monetary Transmission to UK Retail Mortgage Rates before and after August 2007," Discussion Papers 1307, University of Exeter, Department of Economics.
    6. Iris Biefang Frisancho-Mariscal & Peter Howells, 2010. "Interest rate pass-through and risk," Working Papers 1016, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. Toporowski, Jan, 2006. "Open market operations: beyond the new consensus," Bank of Finland Research Discussion Papers 14/2006, Bank of Finland.
    8. Peter Howells, 2005. "The Endogeneity of Money: Empirical Evidence," Working Papers 0513, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

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