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Money And Business Cycles A Real Business Cycle Interpretation

  • PLOSSER, C.I.

This paper focuses on the role of money in economic fluctuations. While money may play an important role in market economies, its role as an important impulse to business cycles remains a highly controversial hypothesis. For years economists have attempted to construct monetary theories of the business cycle with only limited empirical success. Alternatively, recent real theories of the cycle have taken the view that to a first approximation independent variations in the nominal quantity of outside money are neutral. This paper finds that the empirical evidence for a monetary theory of the cycle is weak. Not only do variations in nominal money explain very little of subsequent movements in real activity, but what explanatory power exists arises from variations in endogenous components of money.

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Paper provided by University of Rochester - Center for Economic Research (RCER) in its series RCER Working Papers with number 210.

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Length: 32 pages
Date of creation: 1989
Date of revision:
Handle: RePEc:roc:rocher:210
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University of Rochester, Center for Economic Research, Department of Economics, Harkness 231 Rochester, New York 14627 U.S.A.

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