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The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification

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  • Gordon, David B
  • Leeper, Eric M

Abstract

It is currently popular to identify monetary policy shocks with innovations in some measure of reserves or in the federal funds rate. These assumptions about the interest elasticity of the supply of or demand for reserves imply monetary policy shocks that produce dynamic responses of macroeconomic variables that are anomalous relative to traditional monetary analyses. This paper tentatively identifies supply and demand shocks in the markets for reserves and M2 for the 1980s and contrasts them with results for the 1970s. In the later period, identified monetary policy shocks have dynamic impacts that are fully consistent with traditional analyses. Copyright 1994 by University of Chicago Press.

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  • 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 1228-1247, December.
  • Handle: RePEc:ucp:jpolec:v:102:y:1994:i:6:p:1228-47
    DOI: 10.1086/261969
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    1. Bernanke, Ben S & Blinder, Alan S, 1992. "The Federal Funds Rate and the Channels of Monetary Transmission," American Economic Review, American Economic Association, vol. 82(4), pages 901-921, September.
    2. Leeper, Eric M. & Gordon, David B., 1992. "In search of the liquidity effect," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 341-369, June.
    3. Marvin Goodfriend, 1982. "A model of money stock determination with loan demand and a banking system balance sheet constraint," Economic Review, Federal Reserve Bank of Richmond, vol. 68(Jan), pages 3-16.
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