Abstract
The behavior of the Federal Reserve System can be characterized as secretive. One common justification for this secrecy is the financial markets will overreact to information, causing undue variability in interest rates. This paper examines the credibility of this assertion under the post-October 1979 non-borrowed reserves operating procedure. The major result is that conditional on this operating procedure secrecy can reduce the variability of the federal funds rate. However, in a result analogous to Barro (1976), secrecy raises the variance of the forecasting error of the federal funds rate.
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