Money Surprises and Short-Term Interest Rates: Reconciling ContradictoryFindings

John H. Makin

NBER Working Paper No. 993
Issued in September 1982
NBER Program(s):   ME

This note attempts to reconcile contradictory findings regarding the impact of money surprises on short term interest rates. Expectations effects regarding anticipated monetary policy and anticipated inflation suggest a positive relationship. Liquidity and output effects of monetary surprises suggest a negative relationship. It is shown that intra-day data and end-of-period data will capture expectations effects while period average data will capture liquidity/output effects. Seemingly contradictory results are reconciled by differences in dependent variables employed by various authors.

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Document Object Identifier (DOI): 10.3386/w0993

Published: Makin, John H. "Real Interest, Money Surprises, Anticipated Inflation And Fiscal Deficits," Review of Economics and Statistics, 1983, v65(3), 374-384.

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