Money and Output: Friedman and Schwartz Revisited

Belongia, Michael T.; Ireland, Peter N.

doi:10.1111/jmcb.12332

Cited by 58 publications

(35 citation statements)

References 74 publications

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“…We provide evidence that money matters in describing the e¤ects of monetary policy. Our results reinforce those in Leeper and Roush (2003) and Belongia and Ireland (2016), and as in Belongia and Ireland (2016, p. 268) "call into question the conventional view that the stance of monetary policy can be described with exclusive reference to its e¤ects on interest rates and without consideration of simultaneous movements in the monetary aggregates. "Moreover, the performance of the structural VAR improves signi…cantly if broad Divisia money measures are used when identifying monetary policy shocks.…”

Section: Resultssupporting

confidence: 83%

“…To estimate the parameters of interest, we use an identi…cation scheme similar to that of Belongia and Ireland (2016) . This non-recursive identi…cation strategy provides a more tightly and theoretically motivated speci…cation that allows money to play a role in the conduct of monetary policy.…”

Section: A Structural Var Model Of Monetary Policymentioning

confidence: 99%

“…An alternative interpretation of the fourth row, given by Belongia and Ireland (2015), is that the central bank's policy actions simultaneously a¤ect both the interest rate and the money supply. It is worth noticing that the idea of associating monetary policy shocks with simultaneous movements in the interest rate and the money supply was …rst proposed by Sims (1986), and used by Leeper and Roush (2003) and Belongia and Ireland (2016). Thus, our identi…ed monetary policy shock (MPS) is given by…”

Section: A Structural Var Model Of Monetary Policymentioning

confidence: 99%

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Interest Rates, Money, and Economic Activity

Dery

Serletis

2019

Macroecon. Dynam.

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In this paper, we are motivated by the fact that little is known about the relative performance of broad and narrow Divisia monetary aggregates, and by recent work that tests and rejects the appropriateness of the aggregation assumptions that underlie the various monetary aggregates published by the Federal Reserve as well as a large number of monetary asset groupings suggested by earlier studies. We present a comprehensive comparison of narrow versus broad Divisia monetary aggregates within three classes of empirical models. We compute correlations between the cyclical components of Divisia monetary aggregates at different levels of aggregation and the cyclical component of industrial production. We test for Granger causality running from the Divisia aggregates to industrial production and various other measures of real economic activity. We also reestimate a structural vector autoregression based on earlier work by Leeper and Roush [(2003) Journal of Money, Credit, and Banking 35, 1217–1256] and Belongia and Ireland [(2015) Journal of Business and Economic Statistics 33, 255–269; (2016) Journal of Money, Credit and Banking 48, 1223–1266], modifying that earlier work using monthly rather than quarterly data and extending it, both using broad as well as narrower Divisia monetary aggregates and by allowing for Generalized autoregressive conditional heteroskedasticity (GARCH) behavior in the structural shocks.

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Section: Resultssupporting

confidence: 83%

Section: A Structural Var Model Of Monetary Policymentioning

confidence: 99%

Section: A Structural Var Model Of Monetary Policymentioning

confidence: 99%

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Interest Rates, Money, and Economic Activity

Dery

Serletis

2019

Macroecon. Dynam.

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“…More recently, building on a DSGE model with money developed by Ireland (2004), Castelnuovo (2012) has concluded that money does not play an active role in explaining U.S. output and inflation during the Volcker-Greenspan sample. Furthermore, Belongia and Ireland (2016) also present evidence of the relationship between Divisa monetary aggregates and output based on recent data. Different from these findings, I present evidence in favor of the role of broad money aggregate M3 in influencing monetary policy during the 1980s and 1990s using both real-time and historical data.…”

Section: Introductionmentioning

confidence: 78%

The Role of Money in Federal Reserve Policy

Qureshi

2020

Macroecon. Dynam.

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This paper shows that money is a relevant macroeconomic indicator for the description of US monetary policy with simple rules. Empirical analysis based on novel real-time data reveals the economically and statistically significant effect of money on the federal funds rate during the Volcker–Greenspan era, highlighting an interest rate rule that better explains historical policy. The findings suggest that the bias against including money in mainstream macroeconomic models may be due to relying on an incorrect measure of money. A gradual deviation from this rule explains loose monetary policy prior to the Great Recession. Including money aggregates in rule-based policy presents a suitable framework to evaluate and guide Federal Reserve policy.

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“…For instance, the Divisia monetary aggregate provided more information about inflation using the P-star model in the context of Indonesia (Tang et al, 2015). Furthermore, monetary policy shocks possessed greater and persistent effects on output and price when Divisia money was employed (Belongia and Ireland, 2016). In terms of money demand studies, Puah and Hiew (2010), Leong et al (2010), Hendrickson (2013) and Sianturi et al (2017) retrieved stable money demand functions using Divisia monetary aggregates.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Divisia Money on Monetary Model of Exchange Rate in Indonesia

Leong¹,

Puah²,

Liew³

2018

Economics &Amp; Sociology

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Stability of the exchange rate is critical for policy formulation in Indonesia and thus, has boosted the study of exchange rate behaviour. In this study, the monetary model of exchange rate has been utilised to determine the exchange rate for Indonesia. The model was improved by means of including the Divisia monetary aggregate as the money measure instead of conventional money supply. The ARDL approach, which was valid in spite of the variables' stationary properties, was used for the estimation. The findings indicated that monetary fundamentals are significant in explaining the exchange rate movements in Indonesia when Divisia money was incorporated into the monetary model of the exchange rate. As a result, monetary fundamentals can serve as the determinants of exchange rate in addition to non-monetary fundamentals in the case of Indonesia. High magnitude of the money supply differential and the real income differential coefficients also implied that monetary targeting can serve as a useful instrument for monetary policy in addition to inflation targeting. The research is based on the data ranging from 1984Q1 to 2017Q1.

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Money and Output: Friedman and Schwartz Revisited

Cited by 58 publications

References 74 publications

Interest Rates, Money, and Economic Activity

Interest Rates, Money, and Economic Activity

The Role of Money in Federal Reserve Policy

The Impact of Divisia Money on Monetary Model of Exchange Rate in Indonesia

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