IDEAS home Printed from https://ideas.repec.org/p/bbv/wpaper/0802.html
   My bibliography  Save this paper

Managing expectations by words and deeds: Monetary policy in Asia and the Pacific

Author

Listed:
  • Alicia Garcia-Herrero
  • Eli M. Remolona

Abstract

We examine some of the most basic devices that major central banks in Asia and the Pacific use to communicate with markets. First, we consider gradualism and reversal aversion in the setting of policy rates. We argue that in a world of uncertainty these patterns of behavior help market participants form expectations of future policy rates. Second, we analyse the statements released at the time of policy decisions and suggest that it is not so much the length of the statement that matters but the extent to which it focuses on forward-looking information. We then propose two tests for the effectiveness of central bank communication. The first is a version of the expectations hypothesis of the term structure of interest rates, which is a joint test of the effectiveness of communication and the informational efficiency of the domestic fixed-income market. The second is a surprises test, which compares the reaction of longer term interest rates to policy announcements with the reaction to macroeconomic news

Suggested Citation

  • Alicia Garcia-Herrero & Eli M. Remolona, 2008. "Managing expectations by words and deeds: Monetary policy in Asia and the Pacific," Working Papers 0802, BBVA Bank, Economic Research Department.
  • Handle: RePEc:bbv:wpaper:0802
    as

    Download full text from publisher

    File URL: http://www.bbvaresearch.com/wp-content/uploads/migrados/WP_0802_tcm348-212893.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Filardo, Andrew & Genberg, Hans, 2010. "Monetary Policy Strategies in the Asia and Pacific Region: What Way Forward?," ADBI Working Papers 195, Asian Development Bank Institute.
    2. Andrew Filardo & Hans Genberg, 2010. "Targeting inflation in Asia and the Pacific: lessons from the recent past," BIS Papers chapters,in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 251-273 Bank for International Settlements.
    3. Andrew Filardo & Jason George & Mico Loretan & Guonan Ma & Anella Munro & Ilhyock Shim & Philip Wooldridge & James Yetman & Haibin Zhu, 2010. "The international financial crisis: timeline, impact and policy responses in Asia and the Pacific," BIS Papers chapters,in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 21-82 Bank for International Settlements.
    4. Sahminan Sahminan, 2008. "Effectiveness of monetary policy communication in Indonesia and Thailand," BIS Working Papers 262, Bank for International Settlements.

    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:bbv:wpaper:0802. 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: (OSCAR DE LAS PENAS SANCHEZ-CARO). General contact details of provider: http://edirc.repec.org/data/ebbvaes.html .

    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.

    We have no references for this item. You can help adding them by using 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.