Market reaction to a change in official interest rates will depend on the extent to which the change is anticipated, and on how it is interpreted as a signal of future policy. In this paper, a technique is developed to separate the anticipated and unanticipated components of such changes and is applied to estimate the response of Euro-deutsch mark interest rates to adjustments in the Bundesbankas Lombard and discount rates. The results shed light on the efficiency of this market and on the scope for policy signaling by the central bank.A change in official rates can thus affect expectations that are reflected in longer- term interest rates and other financial market ... and 1989; and Radecki and Reinhart, 1994), the Bank of England (Dale, 1993), the Bank of Canada (Paquet and Perez, 1995), and ... instances when central bank rates were actually changed and neglect occasions when a change was thought possible but did not materialize.
|Title||:||Anticipation and Surprises in Central Bank Interest Rate Policy|
|Author||:||International Monetary Fund|
|Publisher||:||International Monetary Fund - 1998-04-01|