Endogenous Money Supply and the Business Cycle |
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| Affiliation: | 1. University of Bath, Bath, BA2 7AY, UK;2. Lancaster University, Lancaster, LA1 4YW, UK;1. Departament de Ciència Animal, Universitat de Lleida, 25198 Lleida, Spain;2. CITA, Instituto Agroalimentario de Aragón – IA2 CITA-Universidad de Zaragoza, 50059 Zaragoza, Spain |
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| Abstract: | This paper documents changes in the cyclical behavior of nominal data series that appear after 1979:Q3 when the Federal Reserve implemented a policy to lower the inflation rate. Such changes were not apparent in real variables. A business cycle model with impulses to technology and a role for money is used to show how alternative money supply rules are expected to affect observed business cycle facts. In this model, changes in the money supply rules have almost no effect on the cyclical behavior of real variables, yet have a significant impact on the cyclical nature of nominal variables.Journal of Economic LiteratureClassification Numbers: E32, E42, E50. |
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