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Monetary aggregates and the business cycle

Monetary aggregates and the business cycle
Monetary aggregates and the business cycle
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.
0304-3932
451-465
Šustek, Roman
9ba777eb-9161-49c3-9a2c-6cc61cb3a092
Šustek, Roman
9ba777eb-9161-49c3-9a2c-6cc61cb3a092

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).

Record type: Article

Abstract

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.

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More information

e-pub ahead of print date: 8 April 2010
Published date: May 2010
Organisations: Economics

Identifiers

Local EPrints ID: 203635
URI: http://eprints.soton.ac.uk/id/eprint/203635
DOI: doi:10.1016/j.jmoneco.2010.03.003
ISSN: 0304-3932
PURE UUID: 25222937-7b2f-4b94-8d6f-1cf1e3c75d9b

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Date deposited: 17 Nov 2011 16:24
Last modified: 14 Mar 2024 04:28

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Author: Roman Šustek

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