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 ...
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.
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