Monetary aggregates and the business cycle

Šustek, Roman (2010) Monetary aggregates and the business cycle. Journal of Monetary Economics, 57, (4), 451-465. (doi:10.1016/j.jmoneco.2010.03.003).


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A monetary aggregate consisting predominantly of zero-maturity deposits, called MZM, tends to systematically lead output in the US business cycle. Such fluctuations are observed both before and after the 1979 monetary policy change. Similar dynamics are obtained in a model with multi-stage production and purchase-size heterogeneity when agents optimally choose their mix of cash, checkable, and time deposits used in transactions. The causality in the model runs from real activity to money, rather than the other way around. Although the monetary base is endogenous, through a Taylor-type rule, the lead in MZM is primarily driven by deposit creation.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/j.jmoneco.2010.03.003
ISSNs: 0304-3932 (print)
Subjects: H Social Sciences > HB Economic Theory
Divisions : Faculty of Social and Human Sciences > Social Sciences > Economics
ePrint ID: 203635
Accepted Date and Publication Date:
May 2010Published
8 April 2010Made publicly available
Date Deposited: 17 Nov 2011 16:24
Last Modified: 31 Mar 2016 13:47

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