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for extremely helpful comments on previous drafts and Richard Anderson, William Barnett, and Barry Jones for useful conversations and for their patience in answering questions about the construction of their series for the Divisia monetary aggregates. Dekuwmini Mornah provided able research assistance. Neither author received external support for, or has any financial interest that relates to, the research described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

for extremely useful discussions and David Laidler and two anonymous referees for very helpful comments on previous drafts of this paper. The opinions, findings, conclusions, and recommendations expressed herein are our own and do not reflect those of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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 the RBC view of the monetary transmission mechanism, both approaches reveal that movements in the own-price of money are strongly related to movements in output.

More than 50 years ago, Friedman and Schwartz examined historical data for the United States and found evidence of procyclical movements in the money stock, which led corresponding movements in output. We find similar correlations in more recent data; these appear most clearly when Divisia monetary aggregates are used in place of the Federal Reserve's official, simple‐sum measures. When we use information in Divisia money to estimate a structural vector autoregression, identified monetary policy shocks appear to have large and persistent effects on output and prices, with a lag that has lengthened considerably since the early 1980s.

This paper estimates a VAR with time-varying parameters to characterize the changes in Federal Reserve policy that occurred from 2000 through 2007 and assess how those changes affected the performance of the U.S. economy. The results point to a gradual shift in the Fed's emphasis over this period, away from stabilizing inflation and towards stabilizing output. A persistent deviation of the federal funds rate from the settings prescribed by the estimated monetary policy rule appears more important, however, in causing inflation to overshoot its target in the years leading up to the Great Recession.JEL Codes: C32, E31, E32, E37, E52, E58.

A money-in-the-utility function model is extended to capture the distinct roles of noninterest-earning currency and interest-earning deposits in providing liquidity services to households. It implies the existence of a stable money demand relationship that links a Divisia monetary aggregate to spending or income as a scale variable and the associated Divisia usercost dual as an opportunity cost measure. Cointegrating money demand equations of this form appear in quarterly United States data spanning the period from 1967:1 through 2017:2, especially for the Divisia M2 aggregate. The identification of a stable money demand function over a period that includes the financial innovations of the 1980s and continues through the recent financial crisis and Great Recession suggests that a properly measured aggregate quantity of money can play a role in the conduct of monetary policy. That role can be of greater prominence when traditional interest rate policies are constrained by the zero lower bound. JEL Codes: C43, E41.

Similarly, Schuh, using the nominal agricultural export and exchange rate data plotted in chart 1, concludes that "the export boom of the lErOs is seen to be closely tied to the fall in the value of the dollar. The decline in our export performance is closely associated with the rise in the value of the dollar in the 1980s." OS/as S. Batten is a senior economist and Michael 11 Be/on gia is an economist at the Federal Resenie Bank of St Louis. Sarah R. Driver provided research assistance. 'Chattin and Lee (1983), p. 19.