Properly estimating the liquidity effect: why accounting for stationarity and outliers is important
Article Abstract:
A study on liquidity effect as a central element in monetary policy and monetarist theory re-investigated the existence and stability of the liquidity effect between the federal funds interest rate and non-borrowed reserves since 1966. Findings indicate that the existence of the liquidity effect documented by many of the studies examined in this analysis, focuses on narrow monetary aggregates. The major results of this study highlight the ability of the Federal Reserve System to peg interest rates through unanticipated money growth.
Publication Name: Journal of Economics and Business
Subject: Economics
ISSN: 0148-6195
Year: 1999
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A generalized method of moments comparison of the Cox-Ingersoll-Ross and Heath-Jarrow-Morton models
Article Abstract:
Heath-Jarrow-Morton (HJM) no-arbitrage concept proved to be a better model of term structure than the Cox-Ingersoll-Ross (CIR) equilibrium-based approach because it provides a more substantial explanatory power. A comparative analysis of the two models using the Davidson-MacKinnon non-nested J test showed that HJM is a more suitable structure for the US treasury bills data sets. It was also found out that the individual equation values for HJM are larger than CIR, making it a better model for changes in monetary policies.
Publication Name: Journal of Economics and Business
Subject: Economics
ISSN: 0148-6195
Year: 1997
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