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Endogenous Money or Sticky Prices?

  • Peter N. Ireland

    ()

    (Boston College)

What explains the correlations between nominal and real variables in the postwar US data? Are these correlations indicative of significant nominal price rigidity? Or do they simply reflect the particular way that monetary policymakers react to developments in the real economy? To answer these questions, this paper uses maximum likelihood to estimate a model of endogenous money. This model allows, but does not require, nominal prices to be sticky. The results show that nominal price rigidity, over and above endogenous money, plays an important role in accounting for key features of the data.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 499.

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Length: 54 pages
Date of creation: 18 Jun 2001
Date of revision:
Handle: RePEc:boc:bocoec:499
Note: This paper has also been published as NBER WP 9390.
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