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Article
Monetary Policy Shocks and Interest Rates: Further Evidence on the Liquidity Effect
Review of World Economics (Weltwirtschaftliches Archiv)
  • Tony Caporale, University of Dayton
  • Barbara McKiernan, Ohio University - Main Campus
Document Type
Article
Publication Date
6-1-1999
Abstract
This essay tests whether innovations in monetary policy are inversely linked with changes in interest rates. Using Mishkin’s efficient markets framework and the measures of policy innovations constructed by Boschen and Mills and Bemanke and Mihov, we find strong evidence that expansionary monetary policy shocks lower interest rates. We argue that the failure of most studies to find a significant liquidity effect is due to the endogeneity of the monetary aggregates which are used to measure policy shocks.
Inclusive pages
306-316
ISBN/ISSN
0043-2636
Comments

Permission documentation is on file.

Publisher
Springer
Peer Reviewed
Yes
Citation Information
Tony Caporale and Barbara McKiernan. "Monetary Policy Shocks and Interest Rates: Further Evidence on the Liquidity Effect" Review of World Economics (Weltwirtschaftliches Archiv) Vol. 135 Iss. 2 (1999)
Available at: http://works.bepress.com/tony_caporale/44/