DOES MONEY MATTER IN THE IS CURVE? THE CASE OF THE UK

Barry Edward Jones () and Livio Stracca ()

Manchester School, 2008, vol. 76, issue s1, pages 58-84

Abstract: Narrow and broad money measures (including Divisia aggregates) have been found to have explanatory power for UK output in backward-looking specifications of the IS curve. In this paper, we explore whether or not real balances enter into a forward-looking IS curve for the UK. To do this, we test for additive separability between consumption and money over a sizeable part of the post-Exchange Rate Mechanism period using non-parametric methods. A main finding is that the UK data seem to be broadly consistent with additive separability for the more recent period from 1999 to 2007. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd and The University of Manchester.

Date: 2008

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Working Paper: Does money matter in the IS curve? The case of the UK (2008)
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