Off-campus UNL users: To download campus access dissertations, please use the following link to log into our proxy server with your NU ID and password. When you are done browsing please remember to return to this page and log out.
Non-UNL users: Please talk to your librarian about requesting this dissertation through interlibrary loan.
DYNAMICS OF MONEY SUPPLY CHANGES AND THE MARKET FOR DEBT CAPITAL
Abstract
This study investigates the causal relationship between monetary growth rates and bond yields across the term structure. The purpose is to identify which of the competing term structure theories is more useful in the analysis of market phenomena and control of interest rates. In essence, the efficient market model and the corresponding expectations theory of the term structure stand as null hypotheses against alternative term structure theories. A review of the literature is inconclusive about the complete efficiency of the capital markets and allows for the development of several testable hypotheses which differentiate between the competing term structure theories. A procedure developed by Haugh (1976) and Pierce and Haugh (1977) is then used to investigate the causal relationship between the growth rate of monetary aggregates and bond yields across the term structure. The respective series of monetary growth rates are computed from the weekly revised and seasonally unadjusted M1A, M1B, and MB (monetary base) aggregates. The weekly bond yield variable is the short, intermediate, and long-term U.S. Treasury bond yields on actively traded issues adjusted to constant maturities. ARIMA models are estimated and used to extract white noise residuals from the money supply and respective bond yield series. These residuals are then cross-correlated at various leads and lags to determine causal patterns. In general, the results support the notion that the U.S. Government bond market is efficient across the term structure with respect to monetary aggregate information as the efficient market theory would suggest. Specifically, the evidence indicates that the bond yields are virtually unrelated to lagged values of the money variables, but are related in some cases to future values. Thus, the efficient market model and the corresponding expectations hypothesis are most useful in the analysis of market phenomena.
Subject Area
Finance
Recommended Citation
HADDAD, KAMAL MICHEL, "DYNAMICS OF MONEY SUPPLY CHANGES AND THE MARKET FOR DEBT CAPITAL" (1981). ETD collection for University of Nebraska-Lincoln. AAI8124513.
https://digitalcommons.unl.edu/dissertations/AAI8124513