Monetary aggregates and the business cycle

Roman Sustek

Journal of Monetary Economics, 2010, vol. 57, issue 4, 451-465

Abstract: A monetary aggregate consisting predominantly of zero-maturity deposits, called MZM, tends to systematically lead output in the US business cycle. Such fluctuations are observed both before and after the 1979 monetary policy change. Similar dynamics are obtained in a model with multi-stage production and purchase-size heterogeneity when agents optimally choose their mix of cash, checkable, and time deposits used in transactions. The causality in the model runs from real activity to money, rather than the other way around. Although the monetary base is endogenous, through a Taylor-type rule, the lead in MZM is primarily driven by deposit creation.

Keywords: Monetary; aggregates; Business; cycle; General; equilibrium (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (6)

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Working Paper: Monetary Aggregates and the Business Cycle (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:57:y:2010:i:4:p:451-465

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