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Money And Business Cycles A Real Business Cycle Interpretation

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  • PLOSSER, C.I.

Abstract

This paper focuses on the role of money in economic fluctuations. While money may play an important role in market economies, its role as an important impulse to business cycles remains a highly controversial hypothesis. For years economists have attempted to construct monetary theories of the business cycle with only limited empirical success. Alternatively, recent real theories of the cycle have taken the view that to a first approximation independent variations in the nominal quantity of outside money are neutral. This paper finds that the empirical evidence for a monetary theory of the cycle is weak. Not only do variations in nominal money explain very little of subsequent movements in real activity, but what explanatory power exists arises from variations in endogenous components of money.

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Bibliographic Info

Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 210.

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Length: 32 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:roc:rocher:210

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Postal: University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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Keywords: business cycles ; money ; economic theory ; data analysis;

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References

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Cited by:
  1. S. Rao Aiyagari, 1990. "Deflating the case for zero inflation," Quarterly Review, Federal Reserve Bank of Minneapolis, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-11.
  2. Joseph H. Haslag, 1993. "Does it matter how monetary policy is implemented?," Research Paper, Federal Reserve Bank of Dallas 9310, Federal Reserve Bank of Dallas.
  3. Luis Eduardo Arango T., 1998. "Some Univariate Time Series Properties Of Output," BORRADORES DE ECONOMIA 003516, BANCO DE LA REPÚBLICA.
  4. Valerie A. Ramey, 1991. "The Source of Fluctuations in Money: Evidence From Trade Credit," NBER Working Papers 3756, National Bureau of Economic Research, Inc.
  5. Michael T. Belongia & Peter N. Ireland, 2002. "The Own-Price of Money and a New Channel of Monetary Transmission," Boston College Working Papers in Economics, Boston College Department of Economics 544, Boston College Department of Economics.
  6. Joseph H. Haslag & Scott E. Hein, 1995. "Measuring the policy effects of changes in reserve requirement ratios," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q III, pages 2-15.
  7. Jinill Kim, 1998. "Monetary policy in a stochastic equilibrium model with real and nominal rigidities," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1998-02, Board of Governors of the Federal Reserve System (U.S.).
  8. Loungani, Prakash & Rush, Mark, 1995. "The Effect of Changes in Reserve Requirements on Investment and GNP," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(2), pages 511-26, May.
  9. Michelle R. Garfinkel & Daniel L. Thornton, 1991. "The multiplier approach to the money supply process: a precautionary note," Review, Federal Reserve Bank of St. Louis, Federal Reserve Bank of St. Louis, issue Jul, pages 47-64.
  10. Gauger, Jean, 1998. "Economic Impacts on the Money Supply Process," Journal of Macroeconomics, Elsevier, Elsevier, vol. 20(3), pages 553-577, July.

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