Multiscale Analysis of the Liquidity Effect
Antonis Michis ()
No 2011-5, Working Papers from Central Bank of Cyprus
This study examines the existence of a liquidity effect in Mexico over different time scales. This analysis draws from the liquidity preference framework, an approach to interest rate determination, and uses wavelet multiscale analysis in the context of a standardised regression model. The results suggest that, in short-term cycles, interest rates are influenced primarily by changes in the money supply (i.e., the liquidity effect). In medium- and long-term cycles, the liquidity effect becomes less important and interest rates are found to be more sensitive to income and price effects.
Keywords: Interest rates; liquidity effect; money supply; wavelets. (search for similar items in EconPapers)
JEL-codes: E43 E51 (search for similar items in EconPapers)
Pages: 18 pages
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Persistent link: https://EconPapers.repec.org/RePEc:cyb:wpaper:2011-5
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