Journal of Business and Economic Statistics 7 (January 1989) 75-83. In the short run, we expect money growth and interest rates to be negatively correlated – the “liquidity effect.” In the long run, they should be positively correlated – the “inflation effect.” I used bandpass filters to isolate the “runs” and confirmed this prediction. This paper was part of my PhD thesis, and inspired by reading a misleading graph in a Wall Street Journal Op Ed that claimed we were in a new “super-neutrality” regime in which the correlation was always positive.

This was my job market paper, many years ago. Morals: write your thesis on something interesting, not a complex extension of your adviser's latest theory. Do something fun in your job market talk, like demonstrate bandpass filters by swinging your keys. Have Lars Hansen discover a really interesting mistake in technical Appendix C of your job market paper. You too might get a job at Chicago

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