Market Information and Signaling in Central Bank Operations, or, How Often Should a Central Bank Intervene?
March 1, 1997
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Summary
A central bank must decide on the frequency with which it will conduct open market operations and the variability in short-term money market that it will allow. It is shown how the optimal operating procedure balances the value of attaining an immediate target and broadcasting the central bank’s intentions against the informational advantages to the central bank of allowing the free play of market forces to reveal more of the information available to market participants.
Subject: Banking, Central bank operations, Central banks, Financial markets, Financial services, Market interest rates, Money markets, Open market operations, Short term interest rates
Keywords: Central bank operations, central banking, functioning market, informational efficiency, loss function, market development, market information, Market interest rates, market participant, market rate, monetary policy implementation, money market, money market equilibrium yields change, money market interest rates, money market rate, Money markets, open market operations, Short term interest rates, WP
Pages:
28
Volume:
1997
DOI:
Issue:
028
Series:
Working Paper No. 1997/028
Stock No:
WPIEA0281997
ISBN:
9781451844627
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 44, No. 4, December 1997.
