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The Own-Price of Money and the Channels of Monetary Transmission

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  • Belongia, Michael T.
  • Ireland, Peter N.

Abstract

Traditionally, the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels. Real business cycle theory, by contrast, highlights the role of real price changes as a source of revisions in spending and production decisions. Motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism, this paper incorporates a direct measure of the real own-price of money into an estimated vector autoregression and a calibrated real business cycle model. Consistent with the RBC view of the monetary transmission mechanism, both approaches reveal that movements in the own-price of money are strongly related to movements in output.

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File URL: http://dx.doi.org/10.1353/mcb.2006.0025
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Bibliographic Info

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

Volume (Year): 38 (2006)
Issue (Month): 2 (March)
Pages: 429-445

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Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:2:p:429-445

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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Cited by:
  1. Barnett, William A. & Chauvet, Marcelle, 2010. "How better monetary statistics could have signaled the financial crisis," MPRA Paper 24721, University Library of Munich, Germany.
  2. John Keating & Logan Kelly & Andrew Lee Smith & Victor J. Valcarcel, 2014. "A Model of Monetary Policy Shocks for Financial Crises and Normal Conditions," Working Papers in Economics and Finance 1002, UWRF - Center for Economic Research, College of Business and Economics, University of Wisconsin - River Falls.
  3. Barnett, William A. & Chauvet, Marcelle, 2008. "The End of the Great Moderation: “We told you so.”," MPRA Paper 11642, University Library of Munich, Germany.
  4. Edward Nelson, 2011. "Friedman's monetary economics in practice," Finance and Economics Discussion Series 2011-26, Board of Governors of the Federal Reserve System (U.S.).
  5. Barnett, William A. & Chauvet, Marcelle & Tierney, Heather L. R., 2009. "Measurement Error In Monetary Aggregates: A Markov Switching Factor Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S2), pages 381-412, September.
  6. Stracca, Livio, 2007. "Should we take inside money seriously?," Working Paper Series 0841, European Central Bank.
  7. Binner, Jane M. & Bissoondeeal, Rakesh K. & Elger, C. Thomas & Jones, Barry E. & Mullineux, Andrew W., 2009. "Admissible monetary aggregates for the euro area," Journal of International Money and Finance, Elsevier, vol. 28(1), pages 99-114, February.
  8. Barnett, William A. & Chauvet, Marcelle, 2008. "International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview," MPRA Paper 10242, University Library of Munich, Germany.
  9. Peter N. Ireland, 2012. "The Macroeconomic Effects of Interest on Reserves," NBER Working Papers 18409, National Bureau of Economic Research, Inc.
  10. Jones, Barry E. & Fleissig, Adrian R. & Elger, Thomas & Dutkowsky, Donald H., 2008. "Retail sweep programs and monetary asset substitution," Economics Letters, Elsevier, vol. 99(1), pages 159-163, April.
  11. Michael T. Belongia & Peter N. Ireland, 2012. "The Barnett Critique After Three Decades: A New Keynesian Analysis," NBER Working Papers 17885, National Bureau of Economic Research, Inc.
  12. Jones, Barry E. & Stracca, Livio, 2006. "Are money and consumption additively separable in the euro area? A non-parametric approach," Working Paper Series 0704, European Central Bank.

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