{
  "title": "Market Information and Signaling in Central Bank Operations, or, How Often Should a Central Bank Intervene?",
  "publication": "IMF Working Papers, March 1, 1997",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/market-information-and-signaling-in-central-bank-operations-or-how-often-should-a-central-2136",
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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.",
  "sections": [
    {
      "heading": "Summary and core finding",
      "content": "- 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.\n- The optimal operating procedure balances:\n  - the value of attaining an immediate target and broadcasting the central bank’s intentions; and\n  - 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."
    },
    {
      "heading": "Analysis themes and implications",
      "content": "- Market information vs. signaling trade-off:\n  - Frequent interventions help attain immediate targets and communicate intentions.\n  - Less frequent interventions enable markets to reveal private information, improving informational efficiency for the central bank.\n- Operational design considerations:\n  - Choice of intervention frequency influences short-term money market variability.\n  - The central bank’s loss function and market development affect the optimal balance between intervention and nonintervention.\n- Relevance to monetary policy implementation:\n  - Findings relate directly to open market operations, money market equilibrium yields change, and short term interest rates.\n  - Informational efficiency of functioning markets and behavior of market participants are central to implementation choices."
    },
    {
      "heading": "Policy recommendations (implied by analysis)",
      "content": "- Calibrate intervention frequency to trade off immediate control versus information acquisition from markets.\n- Consider the stage of market development and the informational environment when designing operating procedures.\n- Use signaling strategically: intervene when broadcasting intentions yields net benefits relative to the information foregone by markets."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Banking; Central bank operations; Central banks; Financial markets; Financial services; Market interest rates; Money markets; Open market operations; Short term interest rates\n- 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\n\nInternational Monetary Fund — \"Market Information and Signaling in Central Bank Operations, or, How Often Should a Central Bank Intervene?\" (IMF Working Papers 1997, 028).\n\n---\n\n Content in this bundle\n\n- wp9728\n  - wp9728 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp9728 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/market-information-and-signaling-in-central-bank-operations-or-how-often-should-a-central-2136"
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    "Published: March 1, 1997",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451844627.001",
    "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.",
    "The optimal operating procedure balances:",
    "Market information vs. signaling trade-off:",
    "Operational design considerations:",
    "Relevance to monetary policy implementation:",
    "Calibrate intervention frequency to trade off immediate control versus information acquisition from markets.",
    "Consider the stage of market development and the informational environment when designing operating procedures.",
    "Use signaling strategically: intervene when broadcasting intentions yields net benefits relative to the information foregone by markets.",
    "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",
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