The case for Divisia monetary statistics: A Bayesian time-varying approach

Michael Ellington

Journal of Economic Dynamics and Control, 2018, vol. 96, issue C, 26-41

Abstract: The zero lower bound and quantitative easing policies have rekindled interest in the link between monetary aggregates and the business cycle. This paper argues, on the basis of Bayesian time-varying coefficient VAR models that use Divisia indexes, that money is more closely linked to the business cycle, as well as forecasting economic activity more accurately, than existing literature claims. Moreover, the relationship between money and economic activity is considerably more pronounced during periods of economic distress, such as in the Great Recession.

Keywords: Time-varying parameter VAR; Frequency domain; Divisia money; Monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E47 E51 E52 E58 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:96:y:2018:i:c:p:26-41

DOI: 10.1016/j.jedc.2018.10.001

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