Central banks and market interest rates

Biefang-Frisancho Mariscal, Iris; Howells, Peter

Abstract

In a worm of endogenous money, the central bank's role in monetary policy is reduced to the setting of a very short-term official rate of interest, which indicates the price at which it will make liquidity available to the banking system. However, it is changes in market rates that affect behavior, and so the ability of the central bank to influence anything at all depends, first, on the interaction between official and market rates. In this paper, we use a vector autogressive error correction model to explore the response to changes in the central bank rate of three short-term market rates that have been featured previously in this journal in debates about the demand for endogenous money.

• Journal Article Type: Article
• Publication Date: Jan 1, 2002
• Journal: Journal of Post Keynesian Economics
• Print ISSN: 0160-3477
• Electronic ISSN: 1557-7821
• Publisher: Taylor & Francis (Routledge)
• Peer Reviewed: Peer Reviewed
• Volume: 24
• Issue: 4
• Pages: 569-585
• Keywords: central banks, market interest rates
• Public URL: https://uwe-repository.worktribe.com/output/1082170
• Publisher URL: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=6817352&site=ehost-live