Implementing monetary policy in a deregulated financial system: A study of the Australian official short-term money market

Abstract

Deregulation of the Australian financial system in the 1980s necessitated a change of operating procedures for the implementation of monetary policy by the Australian central bank. This paper describes the new procedures, and attempts to model the process whereby changes in the official stance of monetary policy are translated into movements of the market-determined official or "cash" interest rate. The model is estimated using daily data on the flow of funds through the official short-term money market and receives qualified empirical support. © 1995.