Money Demand Accommodation: Impact on Macro-Dynamics and Policy Consequences

Javier Gómez (), Antonio Moreno () and Fernando Pérez de Gracia ()
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Javier Gómez: IESE Business School, University of Navarra
Authors registered in the RePEc Author Service: Javier Gómez Biscarri

No 07/08, Faculty Working Papers from School of Economics and Business Administration, University of Navarra

Abstract: In this paper we account for the U.S. Fed's response to money demand shocks by allowing for less-than-complete accommodation in the estimation of its money supply policy rule. We estimate a significantly lower degree of money accommodation in the 1979-1982 period than before and after. We identify the path of money demand and money supply shocks and show their effects on the money market, output and inflation. Both money demand and money supply shocks have been considerably less destabilizing since 1984. We also find that monetary policy was significantly pro-cyclical in the 70s. Additionally, the price puzzle disappears for two of the three subperiods considered in the study.

Keywords: Money demand shocks; money demand accommodation; monetary policy procedures; macroeconomic dynamics (search for similar items in EconPapers)
JEL-codes: E32 E41 E52 E58 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008-10-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Forthcoming, Journal of Policy Modeling

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Related works:
Journal Article: Money demand accommodation: Impact on macro-dynamics and policy consequences (2010)
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