Interest Rates and Monetary Policy

descriptionPublicationkeyboard_double_arrow_right Article 01 May 1970 English Publisher:University of Chicago PressJournal:Journal of Political Economy, volume 78, pages 431-455 (issn: 0022-3808, eissn: 1537-534X,

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Authors: Gibson, William E;

doi: 10.1086/259643

Interest Rates and Monetary Policy

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Abstract

This paper investigates the empirical operation of some recognized theoretical effects of the money stock on market rates of interest. The analysis covers the period since World War 11, the period for which extensive quarterly and monthly data are available. There is a widespread belief among economists that an increase in the money stock lowers interest rates.1 This conclusion seems to follow from the liquidity-preference relation between the level of interest rates and the quantity of money demanded. As stated by Tobin (1947, p. 126):

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