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Money and sectoral output dynamics in the United States, quarterly 1950/III to 1982/IV

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  • K. Alec Chrystal

Abstract

The impact of money growth and money growth surprises is investigated in a framework in which GNP is disaggregated into its major sectoral components. The evidence presented is not fully consistent with a new classical interpretation of the business cycle. In particular light is thrown on the issue of the lag effect of money surprises. It is discovered that, even when sectoral interactions are accounted for, there are effects of lagged money growth. These lags are inconsistent with an equilibrium/rational expectations approach to business cycles. It is also discovered that growth in an 'outside' component of money has significant real effects. The approach adopted offers the possibility that a structural disaggregation of the supple side of the economy may offer advantages not available in either natural rate or Keynesian macroeconomic models.

Suggested Citation

  • K. Alec Chrystal, 1984. "Money and sectoral output dynamics in the United States, quarterly 1950/III to 1982/IV," Working Papers 1984-020, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:1984-020
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    References listed on IDEAS

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    1. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-115, March.
    2. Buiter, Willem H., 1983. "Real effects of anticipated and unanticipated money : Some problems of estimation and hypothesis testing," Journal of Monetary Economics, Elsevier, vol. 11(2), pages 207-224.
    3. Laidler, David, 1984. "The 'Buffer Stock' Notion in Monetary Economics," Economic Journal, Royal Economic Society, vol. 94(376a), pages 17-34, Supplemen.
    4. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    5. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    6. King, Robert G & Plosser, Charles I, 1984. "Money, Credit, and Prices in a Real Business Cycle," American Economic Review, American Economic Association, vol. 74(3), pages 363-380, June.
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