Central Bank Policy Rate Guidance and Financial Market Functioning

Richhild Moessner and William R. Nelson
Additional contact information
William R. Nelson: Federal Reserve Board

International Journal of Central Banking, 2008, vol. 4, issue 4, 193-226

Abstract: Several central bankers have expressed concern that providing forecasts of future policy rates may impair financial-market functioning.We look for evidence of such impairment by examining the behavior of financial markets in the United States, the euro area, and New Zealand in light of the communication strategies of the central banks. While we find evidence that central bank policy rate forecasts influence market prices in New Zealand, we find no evidence that market participants in the three regions systematically overweight policy rate guidance or that they do not appreciate the uncertainty and conditionality of it. The results suggest that the risk of impairing market functioning is not a strong argument against central banks’ provision of policy rate guidance or forecasts.

JEL-codes: E52 E58 G14 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (69)

Downloads: (external link)
http://www.ijcb.org/journal/ijcb08q4a6.pdf (application/pdf)
http://www.ijcb.org/journal/ijcb08q4a6.htm (text/html)

Related works:
Working Paper: Central bank policy rate guidance and financial market functioning (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2008:q:4:a:6

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().