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Putting "M" back in monetary policy

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Listed author(s):
  • Eric M. Leeper
  • Jennifer E. Roush

Abstract

Money demand and the stock of money have all but disappeared from monetary policy analyses. Remarkably, it is more common for empirical work on monetary policy to include commodity prices than to include money. This paper establishes and explores the empirical fact that whether money enters a model and how it enters matters for inferences about policy impacts. The way money is modeled significantly changes the size of output and inflation effects, and the degree of inertia that inflation exhibits following a policy shock. We offer a simple and conventional economic interpretation of these empirical facts.

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Article provided by Federal Reserve Bank of Cleveland in its journal Proceedings.

Volume (Year): (2003)
Issue (Month): ()
Pages: 1217-1264

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Handle: RePEc:fip:fedcpr:y:2003:p:1217-1264
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Keywords: Monetary policy ; Interest rates;

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Find related papers by JEL classification:
  • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
  • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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