TY  - JOUR
AU  - Christiano,Lawrence J.
AU  - Eichenbaum,Martin
TI  - Identification and the Liquidity Effect of a Monetary Policy Shock
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3920
PY  - 1991
Y2  - November 1991
UR  - http://www.nber.org/papers/w3920
L1  - http://www.nber.org/papers/w3920.pdf
N1  - Author contact info:
Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu

Martin S. Eichenbaum
Department of Economics
Northwestern University
2003 Sheridan Road
Evanston, IL  60208
Tel: 847/491-8232
Fax: 847/491-7001
E-Mail: eich@northwestern.edu
AB  - Conventional wisdom holds that unanticipated expansionary monetary policy shocks cause transient but persistent decreases in real and nominal interest rates. However a number of econometric studies argue that the evidence favors the opposite view, namely that these shocks actually raise, rather than lower, short term interest rates. We show that this conclusion is not robust to the measure of monetary aggregate used or to the assumptions made to identify monetary policy disturbances. For example, when our analysis is done using non borrowed reserves, we find strong evidence in favor of the conventional view. Existing challenges to the conventional view lack credibility not just because of their fragility. They are based upon measures of policy disturbances which generate seemingly implausible implications about things other than interest rates.
ER  -