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Monetary policy and long-term interest rates : An efficient markets approach

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  • Mishkin, Frederie S.

Abstract

This paper is an application of efficient markets theory to analyze empirically the relationship of money supply growth and long-term interest rates. This approach has the advantage over earlier research on this subject in that it imposes a theoretical structure on this relationship that allows easier interpretation of the empirical results as well as more powerful statistical tests. In the interest of ascertaining the robustness of the results, many different empirical tests are carried out in this paper, and they uniformly do not support the proposition that increases in the money supply are correlated with declines in long rates.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 7 (1981)
Issue (Month): 1 ()
Pages: 29-55

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Handle: RePEc:eee:moneco:v:7:y:1981:i:1:p:29-55

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Tarhan, Vefa, 1995. "Does the federal reserve affect asset prices?," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1199-1222.
  2. Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 35(3), pages 463-497, June.
  3. V. Vance Roley & Carl E. Walsh, 1984. "Unanticipated Money and Interest Rates," NBER Working Papers 1278, National Bureau of Economic Research, Inc.
  4. Graciela Kaminsky & Karen K. Lewis, 1993. "Does Foreign Exchange Intervention Signal Future Monetary Policy?," NBER Working Papers 4298, National Bureau of Economic Research, Inc.
  5. Wasim Shahid Malik, 2007. "Monetary Policy Objectives in Pakistan : An Empirical Investigation," Macroeconomics Working Papers 22212, East Asian Bureau of Economic Research.
  6. Evans, Paul, 1981. "Why have interest rates been so volatile?," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue 5, pages 47-67.
  7. David S. Jones & V. Vance Roley, 1982. "Rational Expectations, the Expectations Hypothesis, and Treasury Bill Yields: An Econometric Analysis," NBER Working Papers 0869, National Bureau of Economic Research, Inc.
  8. Fahmy, Yasser A. F. & Kandil, Magda, 2003. "The Fisher effect: new evidence and implications," International Review of Economics & Finance, Elsevier, vol. 12(4), pages 451-465.
  9. Sule Ozler, 1988. "Rescheduling and Bank Value: A Rational Expectations Approach," UCLA Economics Working Papers 488, UCLA Department of Economics.
  10. Jensen, Gerald R. & Mercer, Jeffrey M. & Johnson, Robert R., 1996. "Business conditions, monetary policy, and expected security returns," Journal of Financial Economics, Elsevier, vol. 40(2), pages 213-237, February.
  11. Sule Ozler, 1986. "Valuation of Rescheduled Loans, 1978-1983: A Rational Expectations Approach," UCLA Economics Working Papers 414, UCLA Department of Economics.
  12. Christoph Zenger, 1985. "Zinssätze und Inflation in der Schweiz: Ein alternativer Test des Fisher-Effektes," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 121(IV), pages 353-374, December.
  13. Karen K. Lewis, 1993. "Are Forign Exchange Intervention and Monetary Policy Related and Does it Really Matter?," NBER Working Papers 4377, National Bureau of Economic Research, Inc.
  14. Tony Caporale & Barbara McKiernan, 1999. "Monetary policy shocks and interest rates: Further evidence on the liquidity effect," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(2), pages 306-316, June.
  15. Benjamin Kim & Noor Ghazali, 1998. "The Liquidity Effect of Money Shocks on Short-Term Interest Rates: Some International Evidence," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(4), pages 49-63.
  16. Yash P. Mehra, 1985. "Inflationary expectations, money growth, and the vanishing liquidity effect of money on interest : a further investigation," Economic Review, Federal Reserve Bank of Richmond, issue Mar, pages 23-35.

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