MONEY AND INTEREST-RATES - THE EFFECTS OF TEMPORAL AGGREGATION AND DATA REVISIONS

Econometric estimates of liquidity effects produce results that are, at best, mixed. Yet the liquidity 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 liquidity effect only in the post-October 1979 period and only at a 13-week observational interval with nonaggregated end-of-period M1 data.