Inflation Targeting, Transparency and Interest Rate Volatility: Ditching 'Monetary Mystique' in the U.K.
Posted: 21 Aug 2001
Monetary authorities often seem reluctant to discuss the conduct of monetary policy. There is a concern that greater openness in monetary policy-making may lead to volatility in financial markets, and specifically in interest rates. Although there is very little direct empirical evidence examining this concern, recent changes in the monetary policy framework of the U.K. provide an opportunity to gain some insight. Interestingly, the evidence suggests that even though volatility has indeed risen in the recent past in the U.K., there is no evidence that this volatility is directly attributable to increased information flows per se.
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