Monetary Aggregates and Output

Scott John Freeman and Finn E. Kydland

American Economic Review, 2000, vol. 90, issue 5, pages 1125-1135

Abstract: We ask whether the following observations may result from endogenously determined fluctuations in the money multiplier rather than a causal influence of money on output: (i) M1 is positively correlated with real output; (ii) the money multiplier and deposit-to-currency ratio are positively correlated with output; (iii) the price level is negatively correlated with output; (iv) the correlation of M1 with contemporaneous prices is substantially weaker than the correlation of M1 with real output; (v) correlations among real variables are essentially unchanged under different monetary-policy regimes; and (vi) real money balances are smoother than money-demand equations would predict.

Date: 2000
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Working Paper: Monetary aggregates and output (1998)
Working Paper: Monetary aggregates and output (1998)
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