A Note on Unanticipated Money Growth and Interest Rate Surprises: Mishkin and Makin Revisited .

This note updates Mishkin's empirical work through 1984, confirming his original findings and demonstrating that using period-average interest rates does not produce Makin's result. I also show that lagged money surprises have a significant positive impact on rates, a possibility that Mishkin did not investigate. The next section briefly reviews the efficient markets methodology used in Mishkin, comparing it to the specification found in Makin. Then regressions updating Mishkin's results and incorporating Makin's dependent variable are presented. The paper concludes with an attempt to account for the difference in the two paper's results.
Mishkin's result of a significant positive correlation of unexpected money growth and interest rate surprises is found to still hold after adding the years 1977 through 1984 to the sample. The result "passes" several Chow tests, indicating a degree of temporal stability, and is shown not to depend on whether the interest rate is measured at the end of the quarter or as a period average as Makin claimed. I conjecture that Makin's result is due to an inappropriate restriction in his specification and offer some brief evidence suggesting that this is the case. [ABSTRACT FROM AUTHOR]