CENTRAL BANK SECRECY, INTEREST-RATES, AND MONETARY CONTROL

We construct a dynamic rational expectations model of the federal fund s and deposit market that provides a rationale for central bank secrec y about current monetary aggregate objectives. In this analysis, the T rading Desk values secrecy because it reduces the influence of monetar y control policy on interest rates. We then examine actual U.S. experi ence with monetary control and determine that the reserve bias predict ed by the model is present in the data from 1978 to 1985. Finally, we demonstrate that central bank secrecy may not lower the value of comme rcial banks,