Unanticipated Money and Economic Activity

Robert Barro and Mark Rush

No 339, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper discusses ongoing research on the relation of money to economic activity in the post-World War I1 United States. As in previous work, the stress is on the distinction between anticipated and unanticipated movements of money. Part I deals with annual data. Aside from updating and refinements of earlier analysis, the principal new results concern joint, cross-equation estimation and testing of the money growth, unemployment, output and price level equations. The present findings raise some doubts about the specification of the price equation, although the other relations receive further statistical support. Part I1 applies the analysis to quarterly data. Despite the necessity to deal with pronounced serial correlation of residuals in the equations for unemployment, output and the price level, the main results are consistent with those obtained from annual data. Further, the quarterly estimates allow a detailed description of the lagged response of unemployment and output to money shocks. The estimates reveal some lack of robustness in the price equation, which again suggests some misspecification of this relation.

Date: 1979-04
Note: EFG
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Published as Barro, Robert J. and Rush, Mark. "Unanticipated Money and Economic Activity ." Rational Expectations and Economic Policy, edited by Stanley Fischer, pp . 23-74. Chicago: University of Chicago Press, 1980.
Published as Unanticipated Money and Economic Activity , Robert J. Barro, Mark Rush. in Rational Expectations and Economic Policy , Fischer. 1980

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