ABSTRACT
A number of central banks have endeavoured to make their monetary policy actions more transparent to the public. These central banks include the Reserve Bank of New Zealand, the Bank of Canada, the Bank of England and the Swedish Riksbank. Monetary policy is most effective if market participants correctly anticipate it, since the central bank only controls short-term interest rates, but monetary policy also affects the economy via the impact on longer-term interest rates. Short- and long term interest rates are linked via market expectations. While there has recently been increasing theoretical work on the effects of monetary policy transparency, there has been more limited empirical work on measuring transparency. The official interest rate decision itself would then lead to changes in short-term market interest rates of less than 100 basis points upon its publication, having already been partly anticipated.
