Monetary Shocks and the Nominal Interest Rate
AbstractThis paper reconsiders the effects of monetary shocks on the nominal interest rate in a standard macroeconomic model. It is determined that, when the policy objective is controlling the money stock, money supply shocks generate a situation of excess demand for money. The positive relationship between nominal interest rates and monetary innovations in the United States following the 1979 change in regime is, thus, not puzzling but perfectly consistent with standard theory. Nominal interest rate decreases are possible only when "fine-tuning" rules are adopted. Copyright 1992 by The London School of Economics and Political Science.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 59 (1992)
Issue (Month): 235 (August)
Contact details of provider:
Postal: Houghton Street, London WC2A 2AE
Phone: +44 (020) 7405 7686
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0013-0427
More information through EDIRC
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- V. Vance Roley, 1982. "The Response of Short-Term Interest Rates to Weekly Money Announcements," NBER Working Papers 1001, National Bureau of Economic Research, Inc.
- Barro, Robert J., 1989. "Interest-rate targeting," Journal of Monetary Economics, Elsevier, vol. 23(1), pages 3-30, January.
- McCallum, Bennett T., 1983.
"On non-uniqueness in rational expectations models : An attempt at perspective,"
Journal of Monetary Economics,
Elsevier, vol. 11(2), pages 139-168.
- Bennett T. McCallum, 1981. "On Non-Uniqueness in Rational Expectations Models: An Attempt at Perspective," NBER Working Papers 0684, National Bureau of Economic Research, Inc.
- Nichols, Donald A & Small, David H & Webster, Charles E, Jr, 1983. "Why Interest Rates Rise When an Unexpectedly Large Money Stock Is Announced," American Economic Review, American Economic Association, vol. 73(3), pages 383-88, June.
- Roley, V Vance & Walsh, Carl E, 1985.
"Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements,"
The Quarterly Journal of Economics,
MIT Press, vol. 100(5), pages 1011-39, Supp..
- V. Vance Roley & Carl E. Walsh, 1983. "Monetary Policy Regimes, Expected Inflation, and the Response of Interest Rates to Money Announcements," NBER Working Papers 1181, National Bureau of Economic Research, Inc.
- Robert B. Litterman & Laurence Weiss, 1983.
"Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S. Data,"
NBER Working Papers
1077, National Bureau of Economic Research, Inc.
- Litterman, Robert B & Weiss, Laurence M, 1985. "Money, Real Interest Rates, and Output: A Reinterpretation of Postwar U.S. Data," Econometrica, Econometric Society, vol. 53(1), pages 129-56, January.
- Robert B. Litterman & Laurence M. Weiss, 1984. "Money, real interest rates, and output: a reinterpretation of postwar U.S. data," Staff Report 89, Federal Reserve Bank of Minneapolis.
- McCallum, Bennett T., 1986.
"Some issues concerning interest rate pegging, price level determinacy, and the real bills doctrine,"
Journal of Monetary Economics,
Elsevier, vol. 17(1), pages 135-160, January.
- Bennett T. McCallum, 1986. "Some Issues Concerning Interest Rate Pegging, Price Level Determinacy, and the Real Bills Doctrine," NBER Working Papers 1294, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1984. "Rational Expectations and Macroeconomics in 1984," American Economic Review, American Economic Association, vol. 74(2), pages 179-82, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.