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Estimating the Evolution of Money's Role in the U.S. Monetary Business Cycle

Author

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  • Efrem Castelnuovo

    (University of Padua)

Abstract

We assess the time-varying money's role in the post-WWII U.S. business cycle by estimating a new-Keynesian framework featuring nonseparability in real balances and consumption, portfolio adjustment costs, and a systematic reaction of policymakers to money growth. Rolling-window Bayesian estimations a la Canova (2009) are contrasted to a full sample fixed-coefficient investigation. Our results suggest that the assumption of stable parameters is unwarranted. The omission of money may induce biased assessments on the impact of structural shocks to the U.S. macroeconomic aggregates, especially during the great inflation period.

Suggested Citation

  • Efrem Castelnuovo, 2009. "Estimating the Evolution of Money's Role in the U.S. Monetary Business Cycle," "Marco Fanno" Working Papers 0103, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0103
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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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