This paper tests the rational expectations-natural rate hypothesis withou t basing expectations on time series estimates. Instead, market-based data are used. Unexpected money supply changes are determined via th e Fisher Effect and the Quantity Equation. This introduces errors of a very different kind than the traditional approach, and yet the resu lts are remarkably similar to those generated using time series estim ates. Unanticipated money shocks are shown to exert a significant but only short-run effect on a real output, suggesting only a short-run Phillips curve trade-off. Anticipated money growth appears to have no affect on real output. Copyright 1987 by Oxford University Press.
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Article provided by Oxford University Press in its journal Economic Inquiry.
Volume (Year): 25 (1987) Issue (Month): 2 (April) Pages: 341-49 Download reference. The following formats are available: HTML
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Handle: RePEc:oup:ecinqu:v:25:y:1987:i:2:p:341-49
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