Monetary policy surprises and the bank bill term premium
Date
2008
Authors
Walsh, Kathleen
Tan, David
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Publisher
University of New South Wales
Abstract
Has Australia's shift to an inflation-targeting monetary policy regime had a significant impact on investors' perception of interest-rate risks in the market? We find that since 1990, unanticipated adjustments to monetary policy have had a significantly larger impact on the term premium. This coincides with Australia's adoption of an inflation-targeting monetary policy. Since its implementation, unanticipated adjustments have conveyed more information to financial markets regarding the interest-rate risks in the economy. This new information is immediately assessed and accounted for in the term structure, consequently influencing the term premium in the direction of the unanticipated cash rate adjustment.
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Keywords
Keywords: Term Premium; Unanticipated monetary policy
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Source
Australian Journal of Management
Type
Journal article
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Restricted until
2037-12-31
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