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The Response of Short-Term Interest Rates to Weekly Money Announcements

  • V. Vance Roley
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    The response of short-term interest rates to weekly money announcements since the Federal Reserve's change in operating procedures on October 6, 1979, is examined in this paper. The results indicate that the response increased significantly since October 1979, and that it varies nonlinearly according to the relation of money growth to the Federal Reserve!s long-run targets. The results also suggest that the increase in the response and the rise in the volatility of unanticipated money have contributed about equally to the large rise in interest rate volatility during this period.

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    File URL: http://www.nber.org/papers/w1001.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1001.

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    Date of creation: Oct 1982
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    Publication status: published as Roley, V. Vance. "The Response of Short-Term Interest Rates to Weekly Money Announcements." Journal of Money, Credit, and Banking, edited by Willaim DeWald, Vol. 15, No.3. (August 1983) pp. 344-54.
    Handle: RePEc:nbr:nberwo:1001
    Note: ME
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
    2. 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.
    3. Frederic S. Mishkin, 1981. "Monetary Policy and Short-Term Interest Rates: An Efficient Markets-Rational Expectations Approach," NBER Working Papers 0693, National Bureau of Economic Research, Inc.
    4. Taylor, John B, 1975. "Monetary Policy during a Transition to Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 1009-21, October.
    5. Evans, Paul, 1981. "Why have interest rates been so volatile?," Proceedings, Federal Reserve Bank of San Francisco, issue 5, pages 47-67.
    6. Grossman, Jacob, 1981. "The "Rationality" of Money Supply Expectations and the Short-Run Response of Interest Rates to Monetary Surprises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 409-24, November.
    7. Benjamin M. Friedman, 1980. "Survey Evidence on The Rationality of Interest Rate Expectations," NBER Working Papers 0261, National Bureau of Economic Research, Inc.
    8. Pesando, James E, 1975. "A Note on the Rationality of the Livingston Price Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 849-58, August.
    9. Friedman, Benjamin M., 1980. "Survey evidence on the `rationality' of interest rate expectations," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 453-465, October.
    10. V. Vance Roley, 1982. "Weekly money supply announcements and the volatility of short-term interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Apr, pages 3-15.
    11. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-21, May.
    12. Cornell, Bradford, 1979. "Do Money Supply Announcements Affect Short-Term Interest Rates? A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(1), pages 80-86, February.
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