Output Fluctuations and Monetary Shocks: Evidence From Colombia

Vincent Reinhart and Carmen Reinhart

No 1991/035, IMF Working Papers from International Monetary Fund

Abstract: Using annual data for Colombia over the last thirty years and a new battery of econometric techniques, we test opposing theories that explain macroeconomic fluctuations: The neoclassical synthesis, which posits that, in the presence of temporary price rigidity, an unanticipated monetary expansion produces output gains that erode over time with increases in the price level; and an alternative explanation, which focuses on “real” technological or preference shocks as the sources of output changes. The coefficients from these systems are used to examine two basic propositions: the long-run neutrality of nominal quantities with respect to permanent movements in the money stock; and the short-run sensitivity of output to inflation.

Keywords: WP; exchange rate; money stock; interest rate; price level; interest rate equation; policy variable; price equation; prices trace; compound terms; correlation matrix; World coffee price; monetary policy; Exchange rates; Monetary base; Wages; Inflation; Real exchange rates (search for similar items in EconPapers)
Pages: 34
Date: 1991-03-01
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Citations: View citations in EconPapers (16)

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Journal Article: Output Fluctuations and Monetary Shocks: Evidence from Colombia (1991)
Working Paper: Output Fluctuations and Monetary Shocks: Evidence from Colombia (1991)
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