Some benefits of monetary policy transparency in New Zealand

Aaron Drew () and Ozer Karagedikli ()

No DP2008/01, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: The Reserve Bank of New Zealand (RBNZ) is regarded as one of the most transparent central banks in the world. Recent research suggests that one benefit of such transparency is that financial markets better anticipate a central bank's reaction to incoming data, and in relation, do not over-react to macroeconomic data surprises. In this paper, we provide some institutional details of how the RBNZ communicates its monetary policy decisions to financial markets and conduct an events analysis to test whether there are any transparency benefits in the pricing of New Zealand's yield curve. In line with the recent empirical literature, our results suggest that short-term interest rates tend to react appropriately to the data flow, while longer term interest rates are not unduly influenced. We also show that market reactions tend to be in line with the RBNZ's inflation target objective.

JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2008-02
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Related works:
Journal Article: Some Benefits of Monetary-Policy Transparency in New Zealand (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:nzb:nzbdps:2008/01

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