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Does Money Matter in Shaping Domestic Business Cycles? An International Investigation

  • FABIO CANOVA
  • TOBIAS MENZ

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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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 43 (2011)
Issue (Month): 4 (06)
Pages: 577-607

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Handle: RePEc:mcb:jmoncb:v:43:y:2011:i:4:p:577-607
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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  1. Jeffrey R. Campbell & Zvi Hercowitz, 2005. "The Role of Collateralized Household Debt in Macroeconomic Stabilization," NBER Working Papers 11330, National Bureau of Economic Research, Inc.
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  8. Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-47, December.
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  13. repec:fth:starer:9613 is not listed on IDEAS
  14. Favara, Giovanni & Giordani, Paolo, 2009. "Reconsidering the role of money for output, prices and interest rates," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 419-430, April.
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  18. Andrés, Javier & David López-Salido, J. & Nelson, Edward, 2009. "Money and the natural rate of interest: Structural estimates for the United States and the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 758-776, March.
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