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Monetary Aggregates and the Business Cycle

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  • Sustek, Roman

Abstract

In the U.S. business cycle, a monetary aggregate consisting predominantly of sight deposits strongly leads output, time deposits strongly lag output, and a monetary aggregate consisting of both types of deposits tends to be coincident with the cycle. Such movements are observed both before and after the 1979 monetary policy change. Similar dynamics are obtained in a model with multi-stage production and purchase-size heterogeneity when agents optimally choose their mix of cash, checkable, and time deposits used in transactions. The causality in the model runs from real activity to money, rather than the other way around.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17202.

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Date of creation: 02 Sep 2009
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Handle: RePEc:pra:mprapa:17202

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Keywords: Monetary aggregates; business cycle; general equilibrium;

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