Testing for Real Effects of Monetary Policy Regime Shifts

Huizinga and Mishkin (1986) have recently proposed a simple method for testing whether monetary policy regime changes have affected the ex-ante real rate of interest. This paper shows that care must be taken in choosing the set of variables on which to project the ex-post real rate if inferences about the ex-ante real rate are to be drawn. It is shown that Huizinga. and Mishkin's tests cannot distinguish between shifts in the real rate process and shifts in the inflation process.