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Does money matter in shaping domestic business cycles? An international investigation (with appendices)

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  • Fabio Canova

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  • Tobias Menz

Abstract

We study the contribution of money to business cycle fluctuations in the US, the UK, Japan, and the Euro area using a small scale structural monetary business cycle model. Constrained likelihood-based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks and of the events of the last 40 years.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1242.

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Date of creation: Jul 2009
Date of revision: Nov 2010
Handle: RePEc:upf:upfgen:1242

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Money; business cycles; shock transmission; inflation dynamics.;

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  13. BENNETT T. McCALLUM, 2008. "How Important Is Money in the Conduct of Monetary Policy? A Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1783-1790, December.
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Cited by:
  1. Barthélemy, Jean & Clerc, Laurent & Marx, Magali, 2011. "A two-pillar DSGE monetary policy model for the euro area," Economic Modelling, Elsevier, vol. 28(3), pages 1303-1316, May.

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