Derivatives Activity and Monetary Policy

12 Pages Posted: 12 Jun 2012

See all articles by Christian Upper

Christian Upper

Bank for International Settlements (BIS)

Date Written: September 1, 2006


Trading in futures and options on short-term interest rates has grown rapidly since the turn of the millennium. This feature provides some econometric evidence on the relationship between turnover in this market and changes in policy rates, both actual and expected. The volume of trading in exchange-traded money market derivatives appears to respond mainly to changes in expectations of future interest rates, which is in line with evidence suggesting that monetary policy has become more transparent and predictable relative to the 1980s and early 1990s. Increased uncertainty about future central bank actions is also associated with higher turnover.

JEL Classification: E52, G12

Suggested Citation

Upper, Christian, Derivatives Activity and Monetary Policy (September 1, 2006). BIS Quarterly Review, September 2006, Available at SSRN:

Christian Upper (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002

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