Creator: Bental, Benjamin. and Eden, Benjamin. Series: Lucas expectations anniversary conference Abstract:
We propose a model in which an unanticipated reduction in the money supply leads to a contemporaneous increase in inventories followed by periods with lower output. This persistent real effect does not require price-rigidity or real shocks and confusion. It is obtained in a model in which markets are cleared and agents are price-takers.
Keyword: Productivity, Money supply, Money, and Supply Subject (JEL): E22 - Macroeconomics : Consumption, saving, production, employment, and investment - Capital ; Investment ; Capacity and E51 - Monetary policy, central banking, and the supply of money and credit - Money supply ; Credit ; Money multipliers
Creator: Litterman, Robert B. and Weiss, Laurence M. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 179 Keyword: Money supply, Ex ante rates, Inflation, and Short term rates Subject (JEL): E51 - Money Supply; Credit; Money Multipliers and E40 - Money and Interest Rates: General
Creator: Sargent, Thomas J. and Wallace, Neil Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 025 Keyword: Money supply, Interest rates, Macroeconomic models, and Rational expectations Subject (JEL): E51 - Money Supply; Credit; Money Multipliers and C02 - Mathematical Methods
Creator: Braun, R. Anton and Christiano, Lawrence J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 529 Abstract:
The money demand literature presents much conflicting evidence on this question. For example, Lucas (1988) reports unrestricted money demand regressions which seem to imply that long-run money demand elasticities are highly unstable across subsamples. At the same time, he also presents evidence from money demand regressions with the income elasticity restricted to unity which seem to suggest stability. We conduct a formal analysis which weighs these apparently conflicting facts to determine which hypothesis is more plausible; the hypothesis that money demand is stable, or the hypothesis that money demand is unstable. We find that the stability hypothesis is the more plausible one. Thus, according to our data set, the answer to the question in the title is "yes".
Keyword: Money supply, M1, Regression analysis, Money demand, and Money demand regressions Subject (JEL): E51 - Money Supply; Credit; Money Multipliers and E41 - Demand for Money