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THE IMPACT OF MONEY ON SHORT‐TERM INTEREST RATES
Author(s) -
REICHENSTEIN WILLIAM
Publication year - 1987
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1987.tb00723.x
Subject(s) - economics , monetary economics , term (time) , interest rate , money market , nominal interest rate , empirical evidence , inflation (cosmology) , real interest rate , physics , quantum mechanics , theoretical physics , philosophy , epistemology
This study reviews empirical evidence from four research methods related to the impact of money on short‐term nominal rates. The studies consistently fail to find evidence supporting the much hypothesized short‐term, negative relationship between money and nominal rates since at least April 1975. Reasons for the absence of a negative relationship include the tendency of financial markets to anticipate corrective action by the Fed whenever Ml deviates from targeted growth ranges and a rapid adjustment of inflationary expectations to changes in money growth.