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The Own-Price of Money and a New Channel of Monetary Transmission

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Listed:
  • Michael T. Belongia

    (University of Mississippi)

  • Peter N. Ireland

    (Boston College)

Abstract

Traditionally, the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels. Real business cycle theory, by contrast, highlights the role of real price changes as a source of revisions in spending and production decisions. Motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism, this paper incorporates a direct measure of the real own-price of money into an estimated vector autoregression and a calibrated real business cycle model. Consistent with this new view of the monetary transmission mechanism, both approaches reveal that movements in the own-price of money are strongly related to movements in output.

Suggested Citation

  • Michael T. Belongia & Peter N. Ireland, 2002. "The Own-Price of Money and a New Channel of Monetary Transmission," Boston College Working Papers in Economics 544, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:544
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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