Monetary policy transparency in a forward-looking market: Evidence from the United States |
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| Institution: | 1. The University of Tulsa, Tulsa, OK 74104, United States;2. University of New Mexico, Albuquerque, NM 87111, United States;3. Department of Finance, Spears School of Business, Oklahoma State University, Tulsa/Stillwater, OK 74106, United States;1. Anderson School of Management, University of New Mexico, Albuquerque, NM 87131, USA;2. Graduate Institute of Management, National Taiwan Normal University, Taipei, Taiwan;3. Department of Finance, College of Management, Yuan Ze University, Taoyuan, Taiwan |
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| Abstract: | Because unsatisfactory measures of the monetary policy transparency were used, the existing literature found mixed empirical results for the relationship between the monetary policy transparency and risk/volatility. This paper extends the literature by using a recently developed monetary transparency index Kia’s (2011) index] which is dynamic and continuous. Furthermore, the existing literature ignores the fact that market participants can be forward looking and, therefore, not policy invariant. This study also finds that the agents in the market are not policy invariant and the more transparent the monetary policy is the less risky and volatile the money market will be. |
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| Keywords: | Monetary policy transparency Risk Volatility Money market E43 E51 E52 E58 |
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