The Role of Systematic Fed Errors in Explaining the Money Supply Announcements Puzzle

Empirical studies of the effects of the Federal Reserve's weekly money-supply announcements on interest rates have tended to find that interest-rate changes following these announcements are positively correlated with the anticipated component of the announcement. These studies also have tended to find structural changes in interest-rate responses to money-supply announcements following the Fed's October 1979 policy changes. This paper suggests that these conclusions may simply reflect a failure to adequately account for the presence of systematic errors in the Fed's weekly estimates of the money supply.