Secrecy of Monetary Policy and the Variability of Interest Rates
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.
(This abstract was borrowed from another version of this item.)
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.:
- 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.
- Bennett T. McCallum, 1981. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
- V. Vance Roley & Carl E. Walsh, 1983.
"Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements,"
NBER Working Papers
1181, National Bureau of Economic Research, Inc.
- Roley, V Vance & Walsh, Carl E, 1985. "Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements," The Quarterly Journal of Economics, MIT Press, vol. 100(5), pages 1011-39, Supp..
- Cyert, Richard M & DeGroot, Morris H, 1974. "Rational Expectations and Bayesian Analysis," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 521-36, May/June.
- Michael Dotsey, 1985. "Monetary policy, secrecy, and federal funds rate behavior," Working Paper 85-04, Federal Reserve Bank of Richmond.
- Marvin Goodfriend & Gary Anderson & Anil Kashyap & George 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.
- 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.
- 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 383-88, June.
- Tabellini, Guido, 1988.
"Learning and the volatility of exchange rates,"
Journal of International Money and Finance,
Elsevier, vol. 7(2), pages 243-250, June.
- LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-74, May.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cla:uclawp:426. 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: (Tim Kwok)
If references are entirely missing, you can add them using this form.