The liquidity effect across the short end of the term structure
Because the Federal Reserve is constantly responding to developments in the economy, it has been difficult to come up with convincing estimates of the effects of exogenous shifts in money supply on interest rates. This study uses exogenous, well-identified reserve supply shocks to estimate how money supply shocks that last one day impact short-term interest rates. The results imply that the one-day liquidity effect is substantial, and that it impacts 30- and 90-day private-sector credit markets more than the expectations theory of the term structure predicts. The effect on public debt is smaller and statistically insignificant, implying that reserve supply shocks widen the gap between interest rates on public and private debt.
Volume (Year): 2 (2006)
Issue (Month): 3 (May)
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFL20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFL20|
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.:
- Eric M. Leeper & David B. Gordon, 1991.
"In search of the liquidity effect,"
International Finance Discussion Papers
403, Board of Governors of the Federal Reserve System (U.S.).
- Uesugi, Iichiro, 2002. "Measuring the Liquidity Effect: The Case of Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(3), pages 289-316, September.
When requesting a correction, please mention this item's handle: RePEc:taf:apfelt:v:2:y:2006:i:3:p:159-163. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.