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US Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle

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  • Benk, Szilárd
  • Gillman, Max

    () (Cardiff Business School)

  • Kejak, Michal

Abstract

The post-1983 moderation coincided with an ahistorical divergence in the money aggregate growth and velocity volatilities away from the downward trending GDP and inflation volatilities. Using an endogenous growth monetary DSGE model, with micro-based banking production, enables a contrasting characterization of the two great volatility cycles over the historical period of 1919-2004, and enables this puzzle to be addressed more easily. The volatility divergence is explained by the upswing in the credit volatility that kept money supply variability from translating into inflation and GDP volatility.

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Bibliographic Info

Paper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/28.

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Length: 43 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:cdf:wpaper:2008/28

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Keywords: Volatility; money and credit shocks; growth; inflation;

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Cited by:
  1. Basu, Parantap & Gillman, Max & Pearlman, Joseph, 2009. "Inflation, Human Capital and Tobin's q," Cardiff Economics Working Papers E2009/16, Cardiff University, Cardiff Business School, Economics Section.
  2. Balazs Egert & Douglas Sutherland, 2012. "The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality," CESifo Working Paper Series 3824, CESifo Group Munich.
  3. Parantap Basu & Max Gillman & Joseph Pearlman, 2010. "Inflation, Human Capital and Tobin's q," IEHAS Discussion Papers 1017, Institute of Economics, Hungarian Academy of Sciences.

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