The response of interest rates to the Federal Reserve's weekly money announcements : The 'puzzle' of anticipated money
Researchers, using the survey conducted by Money Market Services, Inc., have found that the anticipated component in the Federal Reserve's weekly money supply announcement is negatively correlated with the post- announcement change in market yields. We prove that eliminating a (downward) bias in the measure of anticipated money can, in theory, eliminate this puzzle, but that improving the efficiency of an already unbiased measure cannot. We find, using Canadian as well as U.S. interest rate data, that correcting the downward bias in the survey measure reduces, but does not eliminate, the role of anticipated money.
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References listed on IDEAS
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- 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.
- Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
- repec:oup:qjecon:v:100:y:1985:i:5:p:1011-39 is not listed on IDEAS
- Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 344-54, August.
- Thomas Urich & Paul Wachtel, 1983. "The Structure of Expectations of the Weekly Money Supply Announcement," NBER Working Papers 1090, National Bureau of Economic Research, Inc.
- Pesando, James E, 1979. "On the Random Walk Characteristics of Short- and Long-Term Interest Rates in an Efficient Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 457-66, November.
- Michael T. Belongia & R. W. Hafer & Richard G. Sheehan, 1986. "A note on the temporal stability of the interest rate-weekly money relationship," Working Papers 1986-002, Federal Reserve Bank of St. Louis.
- Hein, Scott E, 1985. "The Response of Short-term Interest Rates to Weekly Money Announcements: A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(2), pages 264-71, May.
- Cornell, Bradford, 1983. "Money Supply Announcements and Interest Rates: Another View," The Journal of Business, University of Chicago Press, vol. 56(1), pages 1-23, January.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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