Money Surprises and Short-Term Interest Rates: Reconciling ContradictoryFindings
John H. Makin
NBER Working Paper No. 993
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.
Published: Makin, John H. "Real Interest, Money Surprises, Anticipated Inflation And Fiscal Deficits," Review of Economics and Statistics, 1983, v65(3), 374-384.