Increased transparency of central bank activity has replaced bank indepen- dence. The move towards transparency began in 1990 when New Zealand became the first country to announce interest rate targets prior to their implementation. Other countries soon followed. Central bank announcements have pervasive effects in any economy. Announcements provide information about the future path of interest rates which drives decision making by house- holds, businesses and financial institu- tions. These announcements by the central bank can only achieve their desired effect if the transmission of monetary policy through market chan- nels is efficient.
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