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The Liquidity Effect of Money Shocks on Short-Term Interest Rates: Some International Evidence

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  • Benjamin Kim
  • Noor Ghazali

Abstract

There has recently been resurgence of interest in the liquidity effect of money shocks on short-term interest rates. This paper empirically investigates the liquidity effect for some of the G-7 countries, using single equation and vector autoregressive systems estimation methods. Generalized autoregressive conditional heteroskedasticity (GARCH) is employed to better capture the behaviour of interest rates and money. Our results strongly indicate presence of the liquidity effect in most of the countries. [E40, E52]

Suggested Citation

  • 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, vol. 12(4), pages 49-63.
  • Handle: RePEc:taf:intecj:v:12:y:1998:i:4:p:49-63
    DOI: 10.1080/10168739800000020
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    2. Noor Ghazali & Soo-Wah Low, 2002. "The expectation hypothesis in emerging financial markets: the case of Malaysia," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1147-1156.
    3. Chikashi Tsuji, 2005. "Are investors rational in international bond markets?," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(3), pages 169-175, May.

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