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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
  • 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 en dogenous 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7150.

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Date of creation: Jan 2009
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Handle: RePEc:cpr:ceprdp:7150

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Keywords: Growth; Inflation; Money and credit shocks; Volatility;

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Cited by:
  1. Balázs Égert & Douglas Sutherland, 2014. "The Nature of Financial and Real Business Cycles: The Great Moderation and Banking Sector Pro-Cyclicality," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 98-117, 02.
  2. Douglas Sutherland & Peter Hoeller, 2013. "Growth-promoting Policies and Macroeconomic Stability," OECD Economics Department Working Papers 1091, OECD Publishing.
  3. Parantap Basu & Max Gillman & Joseph Pearlman, 2009. " Inflation, Human Capital and Tobin's q," CDMA Conference Paper Series 0904, Centre for Dynamic Macroeconomic Analysis.
  4. 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.
  5. Douglas Sutherland & Peter Hoeller, 2014. "Growth Policies and Macroeconomic Stability," OECD Economic Policy Papers 8, OECD Publishing.

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