Transparent Monetary Policy
35 Pages Posted: 11 Oct 2007
Date Written: July 10, 2007
In 1994 the Federal Reserve System moved to a more transparent reporting of monetary policy. In this paper we first discuss the evolution of Federal Reserve transparency in U.S. and second we test its effectiveness. We assess the empirical impact of monetary policy transparency on the uncertainty about future monetary policy using T-bill rate forecast dispersions from the Survey of Professional Forecasters as a proxy for monetary policy uncertainty. We use three statistical methodologies: descriptive statistics, single regression equations and a vector autoregressive model. The empirical findings confirm that Federal Reserve transparency has reduced the uncertainty of future monetary policy anticipated by market participants.
Keywords: Transparent, Monetary, Policy
JEL Classification: E44, E52, E58
Suggested Citation: Suggested Citation