Many researchers have found that the lagged interest rate enters estimated monetary policy rules with overwhelming significance. However, a recent paper by Rudebusch (2002) argues that the lagged interest rate is not a fundamental component of the U.S. policy rule, and that its significance arises from the omission of serially correlated variables from the policy rule. This paper demonstrates that, contrary to Rudebusch's claims, these two hypotheses can be directly distinguished in the estimation of the policy rule. Our findings indicate that while serially correlated omitted variables may be present, the lagged interest rate enters the policy rule in its own right and plays an important role in describing the behavior of the federal funds rate.

This publication is available on the BIS website (www.bis.org). AbstractCentral bank communication has changed dramatically over the past decade, with some central banks providing guidance about or explicit forecasts of likely future policy rates. One frequently made argument against the provision by central banks of such guidance or forecasts is that it runs the risk of impairing market functioning. In this paper, we evaluate the behaviour of financial markets in the United States, the euro area and New Zealand in light of the communication strategies of central banks, in order to assess whether the provision of policy rate guidance by central banks impairs market functioning. While we find evidence that central bank policy rate forecasts influence market prices in New Zealand, we find no evidence that such guidance or forecasts impair market functioning in the United States, the euro area or New Zealand. The results suggest that the risk of impairing market functioning is not a strong argument against central banks' provision of policy rate guidance or forecasts.JEL classification: E52, E58, G14.

Percid populations have generally increased in abundance relative to other groups of fishes in the 15–25 yr four large reservoirs have been operational on the Missouri River in South Dakota. Saugers (Stizostedion canadense) were initially the most abundant percid, but their numbers gradually declined, probably because of the reduction in river spawning habitat and the increase in water clarity. Yellow perch (Perca flavescens) increased to high population levels as the reservoirs filled but later decreased in abundance. Walleye (S. vitreum vitreum) populations were the slowest to develop in the reservoirs, probably because of initial lack of suitable spawning habitat; they later became well established.The yellow perch was one of the most important forage species in the reservoirs, and walleyes and saugers the primary predator and sport fishes. Sportfishing quality 15–25 yr after impoundment was good, but harvest remained low because of the large size of the reservoirs, inadequacy of facilities for anglers, and the relatively sparse human population. Reproductive success was the primary factor regulating the abundance of percids. Year-class strength was primarily determined by climatic rather than biological factors. Above-average precipitation presumably enhanced reproductive success, both directly by increasing the quantity and quality of spawning substrate through higher stream flows and water levels, and indirectly by providing a larger forage supply, thereby apparently reducing predation on young percids, as well as cannibalism. Kew words: Percidae, reservoirs, Missouri River, Stizostedion, Perca, population dynamics, ecology, precipitation, water level

Sauger (Stizostedion canadense) reproduction and early life history have been studied to determine factors affecting year‐class strength in Lewis and Clark Lake, a 28,000‐acre reservoir on the South Dakota‐Nebraska border. Sauger spawn over a rubble substrate in the Missouri River below Fort Randall Dam. Spawning is initiated at a water temperature of 43 F and is complete in approximately 2 weeks. Maximum egg survival occurs 4 ft below minimum river water level. Eggs hatch in 21 days at an average temperature of 47 F and larvae drift down the Missouri River and into Lewis and Clark Lake. The yolk sac is absorbed in 7 to 9 days and larvae feed primarily upon Cyclops. Larger size larvae feed on Daphnia and Diaptomus. Fish are a major food after sauger reach 70 to 110 mm lengths. Adult year‐class strength was inversely related to water level fluctuations over the spawning grounds. Abundance of larvae was 15 times greater in 1965 when water levels fluctuated 2.67 ft/day than in 1963 when water levels fluctuated 4.44 ft/day. Apparently, year‐class strength is dependent upon water level fluctuation during the incubation period and is determined before young‐of‐the‐year enter Lewis and Clark Lake.