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Monetary Policy Surprises and the Bank Bill Term Premium

Journal Article


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.

UOW Authors


  •   Walsh, Kathleen (external author)
  •   Tan, David

Publication Date


  • 2008

Citation


  • Walsh, K. & Tan, D. (2008). Monetary Policy Surprises and the Bank Bill Term Premium. Australian Journal of Management, 33 (2), 231-260.

Scopus Eid


  • 2-s2.0-66649097011

Has Global Citation Frequency


Number Of Pages


  • 29

Start Page


  • 231

End Page


  • 260

Volume


  • 33

Issue


  • 2

Place Of Publication


  • United Kingdom

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.

UOW Authors


  •   Walsh, Kathleen (external author)
  •   Tan, David

Publication Date


  • 2008

Citation


  • Walsh, K. & Tan, D. (2008). Monetary Policy Surprises and the Bank Bill Term Premium. Australian Journal of Management, 33 (2), 231-260.

Scopus Eid


  • 2-s2.0-66649097011

Has Global Citation Frequency


Number Of Pages


  • 29

Start Page


  • 231

End Page


  • 260

Volume


  • 33

Issue


  • 2

Place Of Publication


  • United Kingdom