Does foreign exchange intervention signal future monetary policy?

Article Abstract:

The assumption that central banks signal changes in forthcoming monetary policy intentions through foreign exchange interventions was examined based on the Federal Reserve's interventions from 1985 to 1990. Statistics for the reaction of exchange rates to both selling dollars and buying dollars intervention were analyzed. It was concluded that the hypothesis that intervention provides a clue to future monetary policy should be rejected. It was further argued that the results of the intervention were opposite that of the predictions under the signalling hypothesis.

Banking Institutions, Depository Credit Intermediation, Foreign exchange market

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When and how much to talk credibility and flexibility in monetary policy with private information

Article Abstract:

The process in which central banks communicate policy statements was examined examined through a model of strategic monetary policy with private information. While secrecy is the norm at central banks, they have to make policy announcements to stabilize employment and sway economic expectations. Central banks, however, face a dilemma regarding the credibility and flexibility of their policy statements. It was suggested that central banks can communicate their policies more effectively through nonverbal communication.

Research, Economics, Information theory, Information theory in economics

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Whom can we trust to run the Fed? Theoretical support for the founders' views

Article Abstract:

The independent structure of the Federal Reserve System (Fed) was analyzed in the context of moves by Congress to make it more accountable to elected government officials. The Fed was structured to isolate the formation of monetary policy from manipulation by business sectors. It was argued that in the controversy concerning the Fed's redistributive powers over inflation, a monetary policy enacted by a majority will only result in a policy that will not be in the best interests even of the majority.

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