Articlegreen1988

The Information Content of Discount Rate Announcements and Their Effect on Market Interest Rates

116 citations0/0 files storedJournal of money credit and banking

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Monetary Policy and Economic Impact Financial Markets and Investment Strategies Banking stability, regulation, efficiency

Abstract

This paper presents evidence that throughout the 1973-85 period the Federal Reserve systematically used certain types of discount rate announcements to signal changes in its policy instrument, the Federal funds rate. Market participants understood the signals contained in discount rate announcements and used them to revise their expectations of the future path of the funds rate. These revisions in funds rate expectations caused movements in Treasury bill rates. The paper also presents evidence that discount rate announcements signaling changes in the funds rate had a strong effect on bond rates in the period since October 1979.

Citations in this library

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Cited by

1995Discount rate changes and security returns in the U.S., 1962–1991 1999Monetary environments and international stock returns 2006Monetary Shocks and REIT Returns 2003The Fed and short-term rates: Is it open market operations, open mouth operations or interest rate smoothing?1999Discount rate changes, stock market returns, volatility, and trading volume: Evidence from intraday data and implications for market efficiency 2007The Asymmetric Response of Equity REIT Returns to Inflation 2006Hotel stock performance and monetary conditions 2001Financial stability, deflation, and monetary policy

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