The relationship between the daily and policy-relevant liquidity effects
The phrase "liquidity effect" was introduced by Milton Friedman (1969) to describe the first of three effects on interest rates caused by an exogenous change in the money supply. The lack of empirical support for the liquidity effect using monthly and quarterly monetary and reserve aggregates data led Hamilton (1997) to suggest that more convincing evidence of the liquidity effect could be obtained with daily data - the daily liquidity effect. This paper investigates the implications of the daily liquidity effect for Friedman's liquidity effect using a more comprehensive model of the Federal Reserve's daily operating procedure than has been previously used in the literature. The evidence indicates that it is no easier to find convincing evidence of a Friedman liquidity effect using daily data than it has been with lower-frequency monthly and quarterly data.
Volume (Year): (2010)
Issue (Month): Jan ()
|Contact details of provider:|| Postal: |
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.stls.frb.org/research/order/pubform.html Email: |
When requesting a correction, please mention this item's handle: RePEc:fip:fedlrv:y:2010:i:jan:p:73-88:n:v.92no.1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.