Money’s Role in the Monetary Business Cycle
نویسنده
چکیده
A small, structural model of the monetary business cycle implies that real money balances enter into a correctly-specified, forward-looking IS curve if and only if they enter into a correctly-specified, forward-looking Phillips curve. The model also implies that empirical measures of real balances must be adjusted for shifts in money demand to accurately isolate and quantify the dynamic effects of money on output and inflation. Maximum likelihood estimates of the model’s parameters take both these considerations into account, but still suggest that money plays a minimal role in the monetary business cycle. JEL codes: E31, E32, E52
منابع مشابه
Liquidity Matters: Money Non-Redundancy in the Euro Area Business Cycle∗
While New Keynesian models label money redundant in shaping business cycle, monetary aggregates are found relevant in predicting output, prices and interest rates or correctly identifying monetary policy shocks. This paper provides new evidence of money non redundancy in Euro area business cycle, contrary to most of recent literature. We study the dynamic effects of liquidity shocks under diffe...
متن کاملLiquidity Effects with Long Lived Production Projects
This paper explores the effects of monetary shocks on the allocation of factors of production. We analyze these effects when money plays a role in improving the timing of the transactions undertaken by entrepreneurs. Such improvement is facilitated by money’s important role in providing liquidity to entrepreneurs. Using a model in which production processes take time to mature and where credit ...
متن کاملMonetary policy objectives and Money’s role in U.S. business cycles
In a sticky-price model in which money can potentially play a key role in business cycles, I estimate monetary policy preference parameters under commitment in a timeless perspective. Empirical findings suggest that inflation stabilization and interest rate smoothing are the main objectives of monetary policy, with a very small role for output gap stabilization. Though the money growth rate is ...
متن کاملThe Effect of Monetary Policy on Business Cycles in Iran Economy
Nowadays one of the most important issues in our economy, both from economic and political view is the link between monetary policy and business cycle fluctuations. Amongst the shocks related to the supply side, the shock of oil price is the important factor that has affected the world economy since the 1970s. This paper examines the effects of monetary policy and oil price shocks on the busine...
متن کاملTest of Real Business Cycle Theory in Iran's economy
This paper tests the importance of real shocks as sources of fluctuations in iran’s economy. For this purpose, based on the work of Boschen and Mills, a set of non-monetary variables which can affect economic growth have been selected and by using an illustrative business cycle model in which the production depends on the past and current value of real shocks, the influence 01’ these variables ...
متن کامل