The Response of Interest Rates to the Federal Reserve's Weekly Money Announcements: The "Puzzle" of Anticipated Money [report]

Richard Deaves, Angelo Melino, James Pesando
1987 unpublished
Researchers, using the survey conducted by Money Market Services, Inc., have found that the anticipated component in the Federal Reserve's weekly money supply announcement is negatively correlated with the postannouncement change in market yields. We prove that eliminating a (downward) bias in the measure of anticipated money can, in theory, eliminate this puzzle, but that improving the efficiency of an already unbiased measure cannot. We find, using Canadian as well as U.S. interest rate data,
more » ... interest rate data, that correcting the downward bias in the survey measure reduces, but does not eliminate, the role of anticipated money.
doi:10.3386/w2125 fatcat:kzvtph6m4fgblkrrb5wavjgtxa