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This paper studies the relation between narrative‐based indicators of monetary policy and widely used money market indicators of monetary policy. Three principal findings emerge. First, changes in monetary policy, as measured by the narrative‐based policy indices, are associated with persistent changes in the levels of M2 and the monetary base. In contrast, changes in the narrative policy indicators lead to transitory changes in short‐term interest rates, nonborrowed reserves, and the spread between the six‐month commercial paper rate and the three‐month treasury bill rate. Third, these findings are generally robust across different narrative‐based policy indices.

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This paper uses contemporaneous monetary data to carry out econometric tests of the "equilibrium" approach to modelling the relation between monetary disturbances and macroeconomic fluctuations. The theoretical analysis introduces into an equilibrium macroeconomic model the availability of preliminary data on current monetary aggregates and the process of accumulation of revised monetary data. The econometric analysis tests two hypotheses derived from this extended model. One hypothesis concerns the neutrality of perceived monetary policy. The other hypothesis concerns the nonneutrality of errors in preliminary monetary data. The econometric results imply rejection of both of these hypotheses. These tests provide strong evidence against the reality of the equilibrium approach.

In this study we examine the long-run effects of unexpected firm performance on CEO compensation. We find that unexpectedly good accounting performance is initially associated with increases in CEO pay. However, this initial effect soon reverses, and is followed by lower CEO pay in later years. Overall, the CEO's long-run cumulative financial gain from unexpectedly good accounting performance is not significantly different from zero. In contrast, unexpectedly good stock price performance is associated with increases in CEO pay for several years. Thus, the CEO's long-run cumulative financial gain from unexpectedly good stock price performance is positive and significant.