Alternative explanations of the money-income correlation
Standard explanations of the bivariate correlation of money and income attribute this correlation to an inability of agents to discriminate in the short run between real and nominal sources of price shocks. This paper is an empirical comparison of the standard explanation with two alternatives: 1) the"credit view", which focuses on financial market imperfections rather than real-nominal confusion; and 2) the real business cycle approach, which argues that the money-income correlation reflects a passive response of money to income. The methodology, which is a variant of the Sims VAR approach, follows Blanchard and Watson (1984) in using an estimated, explicitly structural model to orthogonalize the VAR residuals. (This variant methodology, I argue, is the more appropriate for structural hypothesis testing.) The results suggest that the standard explanations of the money-income relation are largely, but perhaps not completely, displaced by the alternatives.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 25 (1986)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/jme |
When requesting a correction, please mention this item's handle: RePEc:eee:crcspp:v:25:y:1986:i::p:49-99. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.