Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank
April 1, 1998
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Summary
Market reaction to a change in official interest rates will depend on the extent to which the change is anticipated, and on how it is interpreted as a signal of future policy. In this paper, a technique is developed to separate the anticipated and unanticipated components of such changes and is applied to estimate the response of Euro-deutsch mark interest rates to adjustments in the Bundesbank’s Lombard and discount rates. The results shed light on the efficiency of this market and on the scope for policy signaling by the central bank.
Subject: Banking, Central bank rates, Discount rates, Financial services, Interbank rates, Lombard rates, Market interest rates
Keywords: Central bank rates, central banking, discount rate, Discount rates, facility bank, Germany, Interbank rates, interest rate, Lombard rates, Market interest rates, market participant, market rate, monetary policy, official rate, rate, repurchase rate, WP
Pages:
28
Volume:
1998
DOI:
Issue:
043
Series:
Working Paper No. 1998/043
Stock No:
WPIEA0431998
ISBN:
9781451975192
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 45, No. 4, December 1998.
