IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Quantitative Easing: Interest Rates and Money in the Measurement of Monetary Policy

  • Michael T. Belongia

    (University of Mississippi)

  • Peter N. Ireland


    (Boston College)

Over the last twenty-five years, a set of influential studies has placed interest rates at the heart of analyses that interpret and evaluate monetary policies. In light of this work, the Federal Reserve’s recent policy of "quantitative easing," with its goal of affecting the supply of liquid assets, appears as a radical break from standard practice. Superlative (Divisia) measures of money, however, often help in forecasting movements in key macroeconomic variables, and the statistical fit of a structural vector autoregression deteriorates significantly if such measures of money are excluded when identifying monetary policy shocks. These results cast doubt on the adequacy of conventional models that focus on interest rates alone. They also highlight that all monetary disturbances have an important "quantitative" component, which is captured by movements in a properly measured monetary aggregate.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: main text
Download Restriction: no

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 801.

in new window

Date of creation: 18 Jun 2012
Date of revision:
Handle: RePEc:boc:bocoec:801
Contact details of provider: Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Phone: 617-552-3670
Fax: +1-617-552-2308
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. William Barnett & Jia Liu & Ryan Mattson & Jeff van den Noort, 2012. "The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201208, University of Kansas, Department of Economics, revised May 2012.
  2. Leeper, Eric M. & Zha, Tao, 2003. "Modest policy interventions," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1673-1700, November.
  3. Edward Nelson, 2007. "Milton Friedman and U.S. monetary history: 1961-2006," Review, Federal Reserve Bank of St. Louis, issue May, pages 153-182.
  4. Laidler, David, 1997. "Notes on the Microfoundations of Monetary Economics," Economic Journal, Royal Economic Society, vol. 107(443), pages 1213-23, July.
  5. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," International Finance Discussion Papers 761, Board of Governors of the Federal Reserve System (U.S.).
  6. Barnett, William A., 2012. "Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016915, June.
  7. Tatom, John, 2011. "Monetary policy in disarray," MPRA Paper 34607, University Library of Munich, Germany.
  8. Belongia, Michael T. & Ireland, Peter N., 2014. "The Barnett critique after three decades: A New Keynesian analysis," Journal of Econometrics, Elsevier, vol. 183(1), pages 5-21.
  9. Barnett, William A., 1980. "Economic monetary aggregates an application of index number and aggregation theory," Journal of Econometrics, Elsevier, vol. 14(1), pages 11-48, September.
  10. Richard G. Anderson & Barry E. Jones, 2011. "A comprehensive revision of the U.S. monetary services (divisia) indexes," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 325-360.
  11. Belongia, Michael T, 1996. "Measurement Matters: Recent Results from Monetary Economics Reexamined," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1065-83, October.
  12. repec:oup:restud:v:72:y:2005:i:3:p:821-852 is not listed on IDEAS
  13. Hendrickson, Joshua R., 2014. "Redundancy Or Mismeasurement? A Reappraisal Of Money," Macroeconomic Dynamics, Cambridge University Press, vol. 18(07), pages 1437-1465, October.
  14. Thoma, Mark A & Gray, Jo Anna, 1998. "Financial Market Variables Do Not Predict Real Activity," Economic Inquiry, Western Economic Association International, vol. 36(4), pages 522-39, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:801. 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: (Christopher F Baum)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.