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The Cyclical Effects Of Monetary Policy Regimes

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  • Scott J. Dressler

Abstract

A 1979 change in U.S. monetary policy coincided with a break in the cyclical behavior of monetary aggregates, while the cyclical behavior of all other real and nominal variables remained relatively constant. A model is developed to assess the quantitative importance of a change in monetary policy in accounting for these observations. The monetary authority's reaction function is estimated conditionally on the theoretical model and accounts for upward of 72-95% of all observed changes, including inside money preceding the business cycle and a qualitative change in the cyclical behavior of the monetary base. Copyright 2007 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • Scott J. Dressler, 2007. "The Cyclical Effects Of Monetary Policy Regimes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 551-573, May.
  • Handle: RePEc:ier:iecrev:v:48:y:2007:i:2:p:551-573
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    Cited by:

    1. H. Murat Ozbilgin, 2010. "Welfare Gains from Disinflation in an Economy With Currency Substitution (Para Ikamesinin Oldugu Bir Ekonomide Enflasyonun Dusurulmesinden Kaynaklanan Refah Kazanimlari)," Working Papers 1009, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    2. Dressler, Scott J. & Kersting, Erasmus K., 2014. "Economies Of Scale In Banking, Confidence Shocks, And Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 18(05), pages 1069-1090, July.
    3. repec:kap:jfamec:v:38:y:2017:i:4:d:10.1007_s10834-017-9523-x is not listed on IDEAS
    4. Ă–zbilgin, Murat H., 2012. "Currency substitution, inflation, and welfare," Journal of Development Economics, Elsevier, vol. 99(2), pages 358-369.
    5. Dressler, Scott J. & Li, Victor E., 2009. "Inside money, credit, and investment," Journal of Economic Dynamics and Control, Elsevier, vol. 33(4), pages 970-984, April.
    6. Dressler, Scott J., 2009. "Economies of scale in banking, confidence shocks, and business cycles," MPRA Paper 13310, University Library of Munich, Germany.
    7. Sustek, Roman, 2010. "Monetary aggregates and the business cycle," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 451-465, May.

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