Estimating the Evolution of Money’s Role in the U.S. Monetary Business Cycle

Efrem Castelnuovo

Journal of Money, Credit and Banking, 2012, vol. 44, issue 1, 23-52

Abstract: We assess money’s role in the post‐WWII U.S. business cycle by employing both fixed‐coefficient and rolling‐window Bayesian estimations of a structural model of the business cycle with money. Our empirical evidence favors a specification with drifting parameters for money‐consumption nonseparability and the Federal Reserve’s reaction to nominal money growth. The role of money is estimated to have been important during the 1970s and declined afterward. The omission of money produces severely distorted impulse response functions (relative to the model with money). Money is found to be important in replicating the U.S. output volatility during the Great Inflation.

Date: 2012
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https://doi.org/10.1111/j.1538-4616.2011.00468.x

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Journal Article: Estimating the Evolution of Money’s Role in the U.S. Monetary Business Cycle (2012)
Working Paper: Estimating the Evolution of Money's Role in the U.S. Monetary Business Cycle (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:44:y:2012:i:1:p:23-52

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