Is central bank news good news for loan interest rates volatility?

We develop a theoretical framework revealing a negative relationship between the volatility of loan interest rates and central bank transparency. Empirical analysis of G-7 economies supports this theoretical prediction. Addi-tionally, this relationship is strengthening under tight macroprudential regulations.

Automated summary

We propose a theoretical framework that uncovers a negative relationship between loan interest rate volatility and central bank transparency. Empirical analysis on G-7 economies supports this theory, and reveals that this relationship is further strengthened under tight macroprudential regulations.