MARKET-INFORMATION AND SIGNALING IN CENTRAL BANK OPERATIONS, OR, HOW OFTEN SHOULD A CENTRAL BANK INTERVENE

A central bank must decide on the frequency with which it will conduct open market operations and the variability in short-term money market that it will allow. The paper shows how the optimal operating procedu re balances the value of attaining an immediate target and broadcastin g the central bank's intentions against the informational advantages t o the central bank of allowing the free play of market forces to revea l more of the information available to market participants.