Date of Award
University or Center
Atlanta University (AU)
School of Arts and Sciences
Milton Friedman's theory of the influence of money stock changes on interest rates states that a change in the money stock will produce three different effects on interest rates. They are the liquidity effect, the income effect and the price anticipations effect. This study attempts to investigate the hypothesis that the effect on interest rates of changes in money stock growth depends on whether people are or are not inflenced by inflationary price expectations. To investigate this hypothesis we use a lagged modle relating interest rates to lagged money stock growth variables. Using United States' data the empirical results are consistent with our hypothesis that the effect on interest rates of changes in money stock growth does depend on whether people are or are not influenced by inflationary price expectations. Our study is also cosistent with Milton Friedman's theory of the influence of money stock growth on interest rates: an increase in money stock will produce the liquidity effect, the income effect and the price anticipations effect on interest rates.
Rojanavanichkija, Benjamas, "The influence of money stock growth changes on interest rates" (1981). ETD Collection for AUC Robert W. Woodruff Library. 142.