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How Money Affects Real Output

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Author Info
Manchester, Joyce
Abstract

This paper decomposes the money stock into constituent parts to examine the relationship between monetary variables and real economic activity using vector autoregression for 1954 to 1979. The first decomposition reveals that innovations in money multiplier growth rates are approximately three times more influential in determining real output growth than are monetary base growth innovations. The second decomposition includes components of the money multiplier to identify the importance of actions of the public, the banking community, and the monetary authority. The results suggest that the public and the Fed had a significant impact on influencing real output growth. Copyright 1989 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 21 (1989)
Issue (Month): 1 (February)
Pages: 16-32
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:mcb:jmoncb:v:21:y:1989:i:1:p:16-32

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  1. Jha, Raghbendra & Prasad Rath, Deba, 2001. "On the Endogeneity of the Money Multiplier in India," Departmental Working Papers 2001-01, Australian National University, Economics RSPAS. [Downloadable!]
    Other versions:
  2. Prakash Loungani & Mark Rush, 1994. "The effect of changes in reserve requirements on investment and GNP," International Finance Discussion Papers 471, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  3. Charles I. Plosser, 1991. "Money and Business Cycles: A Real Business Cycle Interpretation," NBER Working Papers 3221, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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