Market-Based Monetary Policy Transparency Index, Risk and Volatility - The Case of the United States
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.
|Date of creation:||Apr 2004|
|Date of revision:|
|Publication status:||Published: Carleton Economic Papers|
|Contact details of provider:|| Postal: C870 Loeb Building, 1125 Colonel By Drive, Ottawa Ontario, K1S 5B6 Canada|
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rudebusch, Glenn D., 1995.
"Federal Reserve interest rate targeting, rational expectations, and the term structure,"
Journal of Monetary Economics,
Elsevier, vol. 35(2), pages 245-274, April.
- Glenn D. Rudebusch, 1995. "Federal Reserve interest rate targeting, rational expectations, and the term structure," Working Papers in Applied Economic Theory 95-02, Federal Reserve Bank of San Francisco.
- N. Gregory Mankiw & Jeffrey A. Miron, 1985.
"The Changing Behavior of the Term Structure of Interest Rates,"
NBER Working Papers
1669, National Bureau of Economic Research, Inc.
- N. Gregory Mankiw & Jeffrey A. Miron, 1986. "The Changing Behavior of the Term Structure of Interest Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 211-228.
- Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
- Officer, R R, 1973. "The Variability of the Market Factor of the New York Stock Exchange," The Journal of Business, University of Chicago Press, vol. 46(3), pages 434-53, July.
- Taylor, Mark P, 1992.
"Modelling the Yield Curve,"
Royal Economic Society, vol. 102(412), pages 524-37, May.
- Godfrey, Leslie G, 1978. "Testing against General Autoregressive and Moving Average Error Models When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1293-1301, November.
- Goodfriend, Marvin, 1986.
"Monetary mystique: Secrecy and central banking,"
Journal of Monetary Economics,
Elsevier, vol. 17(1), pages 63-92, January.
- Amir Kia, 2003. "Forward-looking agents and macroeconomic determinants of the equity price in a small open economy," Applied Financial Economics, Taylor & Francis Journals, vol. 13(1), pages 37-54.
- William Poole & Robert H. Rasche, 2000.
"Perfecting the market's knowledge of monetary policy,"
2000-010, Federal Reserve Bank of St. Louis.
- William Poole & Robert Rasche, 2000. "Perfecting the Market's Knowledge of Monetary Policy," Journal of Financial Services Research, Springer;Western Finance Association, vol. 18(2), pages 255-298, December.
- Guido Tabellini, 1986.
"Secrecy of Monetary Policy and the Variability of Interest Rates,"
UCLA Economics Working Papers
426, UCLA Department of Economics.
- 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 425-36, November.
- Eijffinger, S.C.W. & Geraats, P., 2006.
"How transparent are central banks?,"
Other publications TiSEM
b34dfb1f-520f-4787-a08f-5, Tilburg University, School of Economics and Management.
- Eijffinger, S.C.W. & Geraats, P.M., 2004. "How Transparent Are Central Banks?," Cambridge Working Papers in Economics 0411, Faculty of Economics, University of Cambridge.
- Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Kearney, Colm, 2000. "The determination and international transmission of stock market volatility," Global Finance Journal, Elsevier, vol. 11(1-2), pages 31-52.
- Newey, Whitney & West, Kenneth, 2014.
"A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix,"
Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
- Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
- Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
- Schwert, G William, 1989.
" Why Does Stock Market Volatility Change over Time?,"
Journal of Finance,
American Finance Association, vol. 44(5), pages 1115-53, December.
- G. William Schwert, 1988. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
- Sarno, Lucio & Thornton, Daniel L., 2003.
"The dynamic relationship between the federal funds rate and the Treasury bill rate: An empirical investigation,"
Journal of Banking & Finance,
Elsevier, vol. 27(6), pages 1079-1110, June.
- Sarno, Lucio & Thornton, Daniel L, 2002. "The Dynamic Relationship Between the Federal Funds rate and the Treasury Bill Rate: An Empirical Investigation," CEPR Discussion Papers 3225, C.E.P.R. Discussion Papers.
- Lucio Sarno & Daniel L. Thornton, 2002. "The dynamic relationship between the federal funds rate and the Treasury bill rate: an empirical investigation," Working Papers 2000-032, Federal Reserve Bank of St. Louis.
- Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
- Matthew Rafferty & Marc Tomljanovich, 2002. "Central bank transparency and market efficiency: An econometric analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(2), pages 150-161, June.
- Campbell, John & Shiller, Robert, 1987.
"Cointegration and Tests of Present Value Models,"
3122490, Harvard University Department of Economics.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," Cowles Foundation Discussion Papers 785, Cowles Foundation for Research in Economics, Yale University.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
- International Monetary Fund, 2003. "Cross-Country and Cross-Sector Analysis of Transparency of Monetary and Financial Policies," IMF Working Papers 03/94, International Monetary Fund.
- Peter Howells & Iris Biefang-Frisancho Mariscal, 2003. "Central Bank Transparency: A Market Indicator," Working Papers 0305, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
- Dotsey, Michael, 1987. "Monetary policy, secrecy, and federal funds rate behavior," Journal of Monetary Economics, Elsevier, vol. 20(3), pages 463-474, December.
- Kenneth N. Kuttner, 2000.
"Monetary policy surprises and interest rates: evidence from the Fed funds futures markets,"
99, Federal Reserve Bank of New York.
- Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
- Fama, Eugene F., 1976. "Forward rates as predictors of future spot rates," Journal of Financial Economics, Elsevier, vol. 3(4), pages 361-377, October.
- Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
- James Van Horne, 1965. "Interest-Rate Risk and the Term Structure of Interest Rates," Journal of Political Economy, University of Chicago Press, vol. 73, pages 344.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
When requesting a correction, please mention this item's handle: RePEc:car:carecp:04-07. 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: (Sabrina Robineau)
If references are entirely missing, you can add them using this form.