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Market-Based Monetary Policy Transparency Index, Risk and Volatility - The Case of the United States

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Abstract

This paper extends the literature by developing an objective market-based index, which is dynamic and continuous and can be used to measure the monetary policy transparency for a country or, simultaneously, a series of countries. It was found that the more transparent the monetary policy is, the less risky and volatile the money market will be. Furthermore, during the tenure of Chairman Greenspan the volatility and risk in the money market fell. The policy regime changes of adjusting the target rate by multiples of 25 or 50 basis points and including a balance-of-risks sentence in FOMC statements also resulted in a reduction in volatility in the money markets.

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  • Amir Kia & Hilde Patron, 2004. "Market-Based Monetary Policy Transparency Index, Risk and Volatility - The Case of the United States," Carleton Economic Papers 04-07, Carleton University, Department of Economics.
  • Handle: RePEc:car:carecp:04-07
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    Cited by:

    1. Magdalena Szyszko & Karolina Tura, 2015. "Can Inflation Forecast And Monetary Policy Path Be Really Useful? The Case Of The Czech Republic," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 10(3), pages 9-26, September.

    More about this item

    Keywords

    Monetary policy transparency; risk; volatility; money market;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • 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

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