Central Bank Transparency and Short Term Interest Rate Forecasting Uncertainty

Posted: 27 Aug 2008

See all articles by Marc D. Hayford

Marc D. Hayford

Loyola University of Chicago - Department of Economics

A. (Tassos) G. Malliaris

Loyola University of Chicago - Department of Economics

Date Written: August, 25 2008

Abstract

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 descriptive statistics and single regression equations to evaluate the role of transparency. The empirical findings confirm that Federal Reserve transparency has reduced the uncertainty of future monetary policy anticipated by market participants.

JEL Classification: E44, E52, E58

Suggested Citation

Hayford, Marc D. and Malliaris, A. (Tassos) G., Central Bank Transparency and Short Term Interest Rate Forecasting Uncertainty (August, 25 2008). Available at SSRN: https://ssrn.com/abstract=1257242 or http://dx.doi.org/10.2139/ssrn.1257242

Marc D. Hayford

Loyola University of Chicago - Department of Economics ( email )

820 N. Michigan Ave.
Chicago, IL 60611
United States
312-915-6062 (Phone)
312-915-8508 (Fax)

A. (Tassos) G. Malliaris (Contact Author)

Loyola University of Chicago - Department of Economics ( email )

16 E. Pearson Ave
Quinlan School of Business
Chicago, IL 60611
United States
312-915-6063 (Phone)

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