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Monetary Aggregates and the Business Cycle

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  • Sustek, Roman

Abstract

In the U.S. business cycle, a monetary aggregate consisting predominantly of sight deposits strongly leads output, time deposits strongly lag output, and a monetary aggregate consisting of both types of deposits tends to be coincident with the cycle. Such movements are observed both before and after the 1979 monetary policy change. Similar dynamics are obtained in a model with multi-stage production and purchase-size heterogeneity when agents optimally choose their mix of cash, checkable, and time deposits used in transactions. The causality in the model runs from real activity to money, rather than the other way around.

Suggested Citation

  • Sustek, Roman, 2009. "Monetary Aggregates and the Business Cycle," MPRA Paper 17202, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17202
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jmacro:v:54:y:2017:i:pb:p:149-160 is not listed on IDEAS
    2. Michael T. Belongia & Peter N. Ireland, 2013. "Instability: Monetary and Real," Boston College Working Papers in Economics 830, Boston College Department of Economics.
    3. Michael T. Belongia & Peter N. Ireland, 2016. "Money and Output: Friedman and Schwartz Revisited," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(6), pages 1223-1266, September.
    4. Manjong Lee & Sung Guan Yun, 2014. "Composition of Portfolio and Cost of Inflation," Discussion Paper Series 1403, Institute of Economic Research, Korea University.

    More about this item

    Keywords

    Monetary aggregates; business cycle; general equilibrium;

    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
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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