Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework

Matthew Canzoneri, Robert Cumby (), Behzad Diba and López-Salido, J David
Authors registered in the RePEc Author Service: J. David Lopez-Salido

No 6813, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Woodford (2003) describes a popular class of neo-Wicksellian models in which monetary policy is characterized by an interest-rate rule, and the money market and financial institutions are typically not even modelled. Critics contend that these models are incomplete and unsuitable for monetary-policy evaluation. Our Banks and Bonds model starts with a standard neo-Wicksellian model and then adds banks and a role for bonds in the liquidity management of households and banks. The Banks and Bonds model gives a more complete description of the economy, but the neo-Wicksellian model has the virtue of simplicity. Our purpose here is to see if the neo-Wicksellian model gives a reasonably accurate account of macroeconomic behaviour in the more complete Banks and Bonds model. We do this by comparing the models? second moments, variance decompositions and impulse response functions. We also study the role of monetary aggregates and velocity in predicting inflation in the two models.

Keywords: Banks; Monetary aggregates (search for similar items in EconPapers)
JEL-codes: E51 E52 (search for similar items in EconPapers)
Date: 2008-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
https://cepr.org/publications/DP6813 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework (2008)
Working Paper: Monetary aggregates and liquidity in a neo-Wicksellian framework (2008)
Working Paper: Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:6813

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6813

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().