The Influence of Monetary Conditions on the Response of Interest Rate Futures to M1 Releases: 1976-1998

This study examines the response of T-bill and T-bond futures prices to weekly M1 announcements over the period March 1976 to November 1998 conditioned upon monetary operating procedures and the stance in monetary policy. In concurrence with previous studies, this study finds that unanticipated increases in M1 are negatively related to changes in T-bill and T-bond futures prices. However, when the data is sorted by monetary regime, the stance in monetary policy, and direction of money surprise, we find evidence to support the several competing theories historically suggested by <link rid="b6">Cornell (1983b)</link> to explain the impact of money supply announcements. Copyright Blackwell Publishing Ltd, 2004.