Money and Interest Rates: The Effects of Temporal Aggregation and Data Revisions
Authors: Thomas J. Cunningham and Gikas A. Hardouvelis
Journal: Journal of Economics and Business, February 1992, volume 44:19-30
Abstract: Econometric estimates of liquidity effects produce results that are, at best, mixed. Yet the liquids effect remains a central transmission mechanism for monetary effects. This
article examines how problems of data revisions and temporal aggregation affect the empirical effort. We test for liquidity effects, using both initially announced and finally revised M1 data, aggregating across different time intervals and time periods, using different aggregation techniques. We were able to uncover a liquids effect only in the post-October 1979 period and only at a 13-week observational interval with nonaggregated end-of-period M 1 data.