The Transmission of Monetary Policy Via Announcement Effects

UC Davis Working Paper No. 99-06

45 Pages Posted: 12 Oct 1999

See all articles by Selva Demiralp

Selva Demiralp

Koc University - Department of Economics

Oscar Jorda

University of California, Davis - Department of Economics; Federal Reserve Banks - Federal Reserve Bank of San Francisco

Date Written: September 1999

Abstract

The traditional view of the monetary transmission mechanism rests on the premise that the Federal Reserve (Fed) has full control over overnight rates via open market operations. By contrast, this paper tries to establish empirically the Fed's ability to manipulate overnight rates via "announcement" effects. In this paper, announcement effects are defined as unanticipated public disclosures of interest rate targets in the framework of a monetary policy action, not necessarily linked to conventional open market operations. In addition to comparing the relative importance of the more conventional liquidity effect versus the announcement effect, we study the Fed's ability to affect the term structure by surprising markets with announcements of a new level for the Federal funds rate target. This is accomplished with a variation of the autoregressive conditional hazard model introduced by Hamilton and Jorda (1999).

JEL Classification: E5, E4, C5

Suggested Citation

Demiralp, Selva and Jorda, Oscar, The Transmission of Monetary Policy Via Announcement Effects (September 1999). UC Davis Working Paper No. 99-06, Available at SSRN: https://ssrn.com/abstract=184491 or http://dx.doi.org/10.2139/ssrn.184491

Selva Demiralp (Contact Author)

Koc University - Department of Economics ( email )

Rumeli Feneri Yolu
Sariyer 80910 Istanbul
Turkey
+212 338 1842 (Phone)

Oscar Jorda

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-5549382 (Phone)

HOME PAGE: http://old.econ.ucdavis.edu/faculty/jorda/

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
4159742691 (Phone)

HOME PAGE: http://www.frbsf.org/economic-research/economists/oscar-jorda/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
263
Abstract Views
1,660
rank
138,456
PlumX Metrics