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Does money matter in shaping domestic business cycles? An international investigation (with appendices)

Fabio Canova () and Tobias Menz

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We study the contribution of money to business cycle fluctuations in the US, the UK, Japan, and the Euro area using a small scale structural monetary business cycle model. Constrained likelihood-based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks and of the events of the last 40 years.

Keywords: Money; business cycles; shock transmission; inflation dynamics. (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2009-07, Revised 2010-11
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Working Paper: Does Money Matter in Shaping Domestic Business Cycles? An International Investigation (with appendices) (2010) Downloads
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