The Relationship Between the Daily and Policy-Relevant Liquidity Effects (ICPSR 34703)

Published: Jun 14, 2013

Principal Investigator(s):
Daniel L. Thornton, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR34703.v1

Version V1

The phrase "liquidity effect" was introduced by Milton Friedman (1969) to describe the first of three effects on interest rates caused by an exogenous change in the money supply. The lack of empirical support for the liquidity effect using monthly and quarterly monetary and reserve aggregates data led Hamilton (1997) to suggest that more convincing evidence of the liquidity effect could be obtained with daily data -- the daily liquidity effect. This paper investigates the implications of the daily liquidity effect for Friedman's liquidity effect using a more comprehensive model of the Federal Reserve's daily operating procedure than has been previously used in the literature.

Thornton, Daniel L. The Relationship Between the Daily and Policy-Relevant Liquidity Effects. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2013-06-14. https://doi.org/10.3886/ICPSR34703.v1

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United States money supply

2013-06-14

2013-06-14

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