The Response of Interest Rates to the Federal Reserve's Weekly Money Announcements: The "Puzzle" of Anticipated Money

Richard Deaves · Angelo Melino · James E. Pesando

24 citations0/0 files storedNational Bureau of Economic Research

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Monetary Policy and Economic Impact Financial Markets and Investment Strategies Economic theories and models

Abstract

Researchers, using the survey conducted by Money Market Services, Inc., have found that the anticipated component in the Federal Reserve's weekly money supply announcement is negatively correlated with the postannouncement change in market yields.We prove that eliminating a (downward) bias in the measure of anticipated money can, in theory, eliminate this puzzle, but that improving the efficiency of an already unbiased measure cannot.We find, using Canadian as well as U.S. interest rate data, that correcting the downward bias in the survey measure reduces, but does not eliminate, the role of anticipated money.

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References

1984Why interest rates react to money announcements 1981Market Response to the Weekly Money Supply Announcements in the 1970s 1981The "Rationality" of Money Supply Expectations and the Short-Run Response of Interest Rates to Monetary Surprises 1983Money Supply Announcements and Interest Rates: Another View 1982The Response of Short-Term Interest Rates to Weekly Money Announcements 1979On the Random Walk Characteristics of Short- and Long-Term Interest Rates In an Efficient Market 1985Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements 1982The information content of weekly money supply announcements

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2007Canadian stock market multiples and their predictive content 1989Trade deficit announcements, intervention, and the dollar 1989Tests of Covered Interest Rate Parity 1991Money supply announcements: A retrospective 1988Social security payments, money supply announcements, and interest rates

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