Central bank transparency and market efficiency: An econometric analysis

Rafferty, Matthew; Tomljanovich, Marc

doi:10.1007/bf02755982

Cited by 27 publications

(14 citation statements)

References 17 publications

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“…Some studies have simply asked if communications contain predictive power in itself; examples include Mizen (2009) and Jansen and de Haan (2009 transparency improves predictability. Ra¤erty and Tomljanovich (2002) and Lange, Sack and Whitesell (2003) …nd better accuracy for the US Treasury yield curve. Lildholdt and Wetherilt (2004) use a term structure model to show an improvement in the predictability of UK monetary policy.…”

Section: Empirical Studiesmentioning

confidence: 97%

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

Middeldorp

2011

SSRN Journal

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Central banks worldwide have become more transparent. An important reason is that democratic societies expect more openness from public institutions. Policymakers also see transparency as a way to improve the predictability of monetary policy, thereby lowering interest rate volatility and contributing to economic stability. Most empirical studies support this view. However, there are three reasons why more research is needed. First, some (mostly theoretical) work suggests that transparency has an adverse effect on predictability. Second, empirical studies have mostly focused on average predictability before and after specific reforms in a small set of advanced economies. Third, less is known about the effect on interest rate volatility. To extend the literature, I use the Dincer and Eichengreen (2007) transparency index for twenty-four economies of varying income and examine the impact of transparency on both predictability and market volatility. I find that higher transparency improves the accuracy of interest rate forecasts for three months ahead and reduces rate volatility.

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Section: Empirical Studiesmentioning

confidence: 97%

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

Middeldorp

2011

SSRN Journal

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“…The move towards greater transparency appears to have reduced the e¤ect of monetary policy actions on …nancial markets in the UK ( Haldane and Read (2000); Clare and Courtenay (2001)) and Canada (Muller and Zelmer 1999). US bond markets have been more e¢cient and less volatile since Fed policy transparency in 1994 (Ra¤erty and Tomljanovich 2002). The publication of MPC voting records in the UK has made it easier to predict future monetary policy decisions (Gerlach-Kristen 2004).…”

Section: Introductionmentioning

confidence: 99%

Does Central Bank Transparency Reduce Interest Rates?

2006

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Does Central Bank Transparency Reduce Interest Rates?* Central banks have become increasingly transparent during the last decade. One of the main benefits of transparency predicted by theoretical models is that it enhances the credibility, reputation, and flexibility of monetary policy, which suggests that increased transparency should result in lower nominal interest rates. This paper exploits a detailed transparency data set to investigate this relationship for eight major central banks. It appears that for all central banks, the level of interest rates is affected by the degree of central bank transparency. In particular, the majority of the improvements in transparency are associated with significant effects on interest rates, controlling for economic conditions. In most of these cases, interest rates are lower, often by around 50 basis points, although in some instances transparency appears to have had a detrimental effect on interest rates. JEL Classification: E52 and E58

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“…Demiralp (2001) documents that most market rates adjust to anticipated policy actions prior to the actual announcement. Rafferty and Tomljanovich (2002) find that forecasting error has decreased since 1994 for interest rates on US bonds for most maturity lengths. Lange et al (2003) obtain similar results and identify two components of the enhanced predictability:…”

Section: Introductionmentioning

confidence: 91%

Managing financial market expectations: The role of central bank transparency and central bank communication

Neuenkirch

2012

European Journal of Political Economy

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Central bank transparency and market efficiency: An econometric analysis

Cited by 27 publications

References 17 publications

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

Central Bank Transparency, the Accuracy of Professional Forecasts, and Interest Rate Volatility

Does Central Bank Transparency Reduce Interest Rates?

Managing financial market expectations: The role of central bank transparency and central bank communication

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