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US Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle

Szilard Benk (), Max Gillman () and Michal Kejak ()

No E2008/28, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: The post-1983 moderation coincided with an ahistorical divergence in the money aggregate growth and velocity volatilities away from the downward trending GDP and inflation volatilities. Using an endogenous growth monetary DSGE model, with micro-based banking production, enables a contrasting characterization of the two great volatility cycles over the historical period of 1919-2004, and enables this puzzle to be addressed more easily. The volatility divergence is explained by the upswing in the credit volatility that kept money supply variability from translating into inflation and GDP volatility.

Keywords: Volatility; money and credit shocks; growth; inflation (search for similar items in EconPapers)
JEL-codes: E13 E32 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-mac and nep-mon
Date: 2008-11
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Working Paper: US Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle (2009) Downloads
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