No. 305 - The Role of the Different Central Bank Rates in the Transmission of Monetary Policy
The monetary policy operating procedures of the Bank of Italy are based on the determination of both official rates and the rates on repo operations. This feature is common to the European countries that use some kind of interest rate "corridor". Under the prevailing interpretation, this procedure allows the central bank to separate the short-run effects from more persistent changes in the monetary stance. The paper reviews the rationale for using different instruments to implement either transparent and persistent interest rate movements or more gradual and less immediately visible ones, as may be found in the economic literature.
The empirical evidence for Italy confirms that different policy rates have different effects: official rate changes mainly play a signaling role, with a faster effect on the whole interest rate structure and on expectations; repo rates have an immediate impact only on the very-short-term end of the yield curve. However, as repo rates represent the actual cost of most of banks' refinancing, market rates eventually tend towards them.
Full text
-
30 April 1997
YouTube
X - Banca d'Italia
Linkedin
RSS
E-mail Alert
