EconPapers    
Economics at your fingertips  
 

Greater Transparency in Monetary Policy: Impact on Financial Markets

Philippe Muller and Mark Zelmer

Technical Reports from Bank of Canada

Abstract: Measures have been taken by the Bank of Canada to increase the transparency of Canadian monetary policy. This paper examines whether the greater transparency has improved financial markets’ understanding of the conduct of monetary policy. In theory, it should result in reduced conditional uncertainty because investor expectations would be formed with a superior information set. The market’s response to releases of the Bank of Canada’s Monetary Policy Report and to changes in the Bank’s operating band for the overnight interest rate is examined. The empirical results suggest that the Bank’s efforts at increasing transparency appear to have helped market participants anticipate pending monetary policy actions. Indeed, the amount of uncertainty that surrounds the Bank’s actions is now broadly consistent with that reported for other major countries. The issue of whether there should be limits on the amount of transparency in the conduct of monetary policy is also explored. The paper concludes that there is possibly some merit in the Bank’s providing more frequent information on its economic outlook and highlighting the uncertainty that surrounds the Bank’s views. However, the paper argues against publishing the detailed results of the Bank’s economic projections. It also notes that the element of surprise can be useful on occasion with respect to the Bank’s operations in financial markets.

Keywords: Financial markets; Monetary policy implementation (search for similar items in EconPapers)
JEL-codes: E52 E58 G14 (search for similar items in EconPapers)
Pages: 39 pages
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2010/01/tr86.pdf

Related works:
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:bca:bocatr:86

Access Statistics for this paper

More papers in Technical Reports from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-03-17
Handle: RePEc:bca:bocatr:86