Anticipation of Monetary Policy and Open Market Operations

International Journal of Central Banking, Forthcoming

41 Pages Posted: 19 Oct 2006

See all articles by Seth B. Carpenter

Seth B. Carpenter

Board of Governors of the Federal Reserve System

Selva Demiralp

Koc University - Department of Economics

Abstract

Central banking transparency is now a topic of great interest, but its impact on the implementation of monetary policy has not been studied. This paper documents that anticipated changes in the federal funds rate target complicate open market operations. We provide theoretical and empirical evidence on the behavior of banks and the Open Market Desk. We find a significant shift in demand for funds ahead of expected target rate changes and that the Desk only incompletely accommodates this shift in demand. This anticipation effect, however, does not materially affect other markets.

Keywords: Monetary Policy, Open Market Operations, Anticipation

JEL Classification: E5, E52, E58

Suggested Citation

Carpenter, Seth B. and Demiralp, Selva, Anticipation of Monetary Policy and Open Market Operations. International Journal of Central Banking, Forthcoming, Available at SSRN: https://ssrn.com/abstract=938691

Seth B. Carpenter (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2385 (Phone)
202-452-2301 (Fax)

Selva Demiralp

Koc University - Department of Economics ( email )

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

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