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Endogenous Money Supply and the Business Cycle

Author

Listed:
  • William T. Gavin

    (Federal Reserve Bank of St. Louis)

  • Finn E. Kydland

    (Carnegie Mellon University)

Abstract

This paper documents changes in the cyclical behavior of nominal data series that appear after 1979:Q3 when the Federal Reserve implemented a policy to lower the inflation rate. Such changes were not apparent in real variables. A business cycle model with impulses to technology and a role for money is used to show how alternative money supply rules are expected to affect observed business cycle facts. In this model, changes in the money supply rules have almost no effect on the cyclical behavior of real variables, yet have a significant impact on the cyclically nature of nominal variables. (Copyright: Elsevier)

Suggested Citation

  • William T. Gavin & Finn E. Kydland, 1999. "Endogenous Money Supply and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 347-369, April.
    • Handle: RePEc:red:issued:v:2:y:1999:i:2:p:347-369
    DOI: 10.1006/redy.1998.0055
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    References listed on IDEAS

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    More about this item

    Keywords

    business cycle facts; endogenous monetary policy; real business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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