ACCOUNTING FOR THE RELATIONSHIP BETWEEN MONEY AND INTEREST RATES

Magnus Jonsson and Paul Klein ()

Macroeconomic Dynamics, 2006, vol. 10, issue 04, pages 545-571

Abstract: In time-series from the United States, the relationship between the money to income ratio and the nominal interest rate is a negative and stable one. In Swedish data, there is no such stable relationship. In this paper, we argue that this difference can be explained by the differences in the shock processes that have hit the two countries. Using a dynamic general equilibrium model driven by shock processes estimated to fit the two countries, we find that we can account for the main properties of the data remarkably well.

Date: 2006

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Working Paper: Accounting for the Relationship between Money and Interest Rates (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:cup:macdyn:v:10:y:2006:i:04:p:545-571_05

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