The liquidity effect: Identifying short-run interest rate dynamics using long-run restrictions

The Role of Macroeconomic Variables on Stock Market Index in China and India

“…In this regards Lastrapes and Selgin (1995) find that money supply has a dynamic effect on price of real equity and Pebbles and Wilson (1996) indicated that when an appreciating currency happens, it is generally accompanied by increases in reserves, money supply and decreases in interest rates. As a result, the cost of capital and imported inputs decrease, leading to an increase in local equity returns.…”

Macroeconomic modeling with asymmetric vector autoregressions

“…, Bayoumi and Eichengreen (1994), Bordo (1993), Faust and Leeper (1997), Gamber and Joutz (1993), Karras (1994), Keating and Nye (1998), Keating and Nye (1999) and Lastrapes and Selgin (1995). However, Keating and Nye (1998) find evidence that permanent output shocks are associated with aggregate demand in many economies before World War I.…”

The Effects of Monetary Policy Shocks: Comparing Contemporaneous versus Long-Run Identifying Restrictions

“…No restrictions are placed on the contemporaneous relations among the variables. This procedure (hereafter referred to as LR) was introduced by Blanchard and Quah (1989) and Shapiro and Watson (1988) to identify shocks to aggregate demand and supply and has been used recently by Lastrapes and Selgin (1995) to identify money supply shocks and by Fackler and McMillin (1998) to identify monetary policy shocks. 4 The key restrictions used to identify monetary policy shocks in this approach are neutrality restrictions.…”

“…However, estimates of the macroeconomic effects of monetary policy often differ across studies with regard to both timing and magnitude. The studies generating these estimates frequently differ in terms of the variables comprising the model, the sample period for estimation, and the method of identifying policy shocks; see, for example, Christiano, Eichenbaum, and Evans (1994;, Gordon and Leeper (1994), Lastrapes and Selgin (1995), Pagan and Robertson (1995;, and Leeper, Sims, and Zha (1996).…”

“…Although economic and institutional arguments can be used to rationalize each identification scheme, there is no consensus as to which approach to identifying shocks is preferred, and the weaknesses of both approaches have been discussed in the literature. 1 Keating (1992), Lastrapes andSelgin (1995), andMcCarthy (1995) consider limitations of the use of contemporaneous identifying restrictions. Faust and Leeper (1997) discuss potential drawbacks of imposing long-run restrictions.…”