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It is shown how the frequency of central bank intervention in financial markets can affect the incentives for economic agents to acquire information, which will be reflected in market prices and thus become available to policy makers. The optimal frequency of intervention, and therefore the optimal interest rate variability, will balance the desirability of attaining given operational targets against the benefits of encouraging informational efficiency. The ability of the central bank to send clear signals of its own intentions will also depend on market informational efficiency.

Banks and Banking --- Finance: General --- Monetary Policy --- Information and Market Efficiency --- Event Studies --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: General (includes Measurement and Data) --- Banking --- Finance --- Money markets --- Banks and banking --- Money market

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Since the Australian dollar was floated in December 1983, the Australian central bank (Reserve Bank of Australia) has actively intervened in the foreign exchange market. Using daily exchange rate and official intervention data from January 1984 to December 2001, this paper examines what effects, if any, foreign exchange operations by the Reserve Bank of Australia (RBA) have had on the level and volatility of the Australian dollar exchange rate. First, using an event study we evaluate the effectiveness of intervention by examining its direct effect on the level of the exchange rate. We find that over the period 1997-2001, the RBA has had some success in its intervention operations, by moderating the depreciating tendency of the Australian dollar. Second, we investigate the effects of RBA intervention policies on exchange rate volatility over the floating rate period. Our results indicate that intervention operations tend to be associated with an increase in exchange rate volatility, which suggests that official intervention may have added to market uncertainty. Overall, the effects of RBA intervention are quite modest on both the level and the volatility of the Australian dollar exchange rate.

Finance: General --- Foreign Exchange --- Money and Monetary Policy --- Information and Market Efficiency --- Event Studies --- International Financial Markets --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Finance --- Monetary economics --- Exchange rates --- Currency markets --- Exchange rate adjustments --- Currencies --- Foreign exchange intervention --- Financial markets --- Money --- Foreign exchange market --- Australia

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Prices in futures markets and option markets reflect expectations about future price movements in spot markets, but these prices can also be influenced by risk premia. Futures and forward prices are sometimes interpreted as market expectations for future spot prices, and option prices are used to calculate the market’s expectations for future volatility of spot prices. Do these prices accurately reflect market expectations? The purpose of this paper is to examine the information that is reflected in futures prices and option prices. The issue is examined by reviewing both the relevant analytical models and the empirical evidence.

Asset prices --- Capacity --- Capital --- Deflation --- Derivative securities --- Event Studies --- Finance --- Financial institutions --- Financial Instruments --- Financial Markets and the Macroeconomy --- Futures --- Inflation --- Information and Market Efficiency --- Institutional Investors --- Intangible Capital --- Investment & securities --- Investment --- Investments: Futures --- Investments: General --- Investments: Options --- Investments: Stocks --- Macroeconomics --- National accounts --- Non-bank Financial Institutions --- Options --- Pension Funds --- Price Level --- Prices --- Return on investment --- Saving and investment --- Stocks --- United States

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Several transition countries have experienced strong real exchange rate appreciations. This paper tests the hypothesis that these appreciations reflect underlying productivity gains in the tradable sector. Using panel data over the period 1993-98, the results show clear evidence of productivity-driven exchange rate movements in the central and eastern European and Baltic countries. Transition countries, particularly the EU accession countries that have begun to catch up, can expect to experience further productivity-driven real exchange rate appreciations. Evidence from a large cross-section of non-transition countries indicates that catching up by one percent will be associated with a 0.4 percent real appreciation.

Foreign Exchange --- Production and Operations Management --- International Finance: General --- Information and Market Efficiency --- Event Studies --- International Financial Markets --- Socialist Institutions and Their Transitions: Financial Economics --- Macroeconomics: Production --- Currency --- Foreign exchange --- Macroeconomics --- Real exchange rates --- Productivity --- Real effective exchange rates --- Exchange rates --- Industrial productivity --- Production --- Russian Federation

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Is the stock market responsive to macroeconomic news? This paper employs the daily returns of the Dow Jones Industrial Index, the S&P 500 index, the Russell 1000 index, and the Russell 2000 index to examine stock market reactions to a broad list of macroeconomic announcements, including money supply, inflation, employment, housing starts, and trade balances, etc. Several announcements concerning real economic activity that have received little attention in previous research are shown to have a significant impact on stock prices. The paper also presents preliminary evidence for the different reaction to macroeconomic news by small cap stocks and large cap stocks.

Banks and Banking --- Finance: General --- Inflation --- Macroeconomics --- Industries: General --- Price Level --- Deflation --- General Financial Markets: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Financial Markets and the Macroeconomy --- Information and Market Efficiency --- Event Studies --- Finance --- Asset prices --- Stock markets --- Discount rates --- Industrial production --- Prices --- Financial markets --- Financial services --- Production --- Stock exchanges --- Discount --- Industries --- United States