Arbeitspapier
Monetary Policy in a World Where Money (Also) Matters
While the long-run relation between money and inflation as predicted by the quantity theory is well established, empirical studies of the short-run adjustment process have been inconclusive at best. The literature regarding the validity of the quantity theory within a given economy is mixed. Previous research has found support for quantity theory within a given economy by combining the P-Star, the structural VAR and the monetary aggregation literature. However, these models lack precise modelling of the short-run dynamics by ignoring interest rates as the main policy instrument. Contrarily, most New Keynesian approaches, while excellently modeling the short-run dynamics transmitted through interest rates, ignore the role of money and thus the potential mid- and long-run effects of monetary policy. We propose a parsimonious and fairly unrestrictive econometric model that allows a detailed look into the dynamics of a monetary policy shock by accounting for changes in economic equilibria, such as potential output and money demand, in a framework that allows for both monetarist and New Keynesian transmission mechanisms, while also considering the Barnett critique. While we confirm most New Keynesian findings concerning the short-run dynamics, we also find strong evidence for a substantial role of the quantity of money for price movements.
- Sprache
-
Englisch
- Erschienen in
-
Series: IWH Discussion Papers ; No. 6/2012
- Klassifikation
-
Wirtschaft
Price Level; Inflation; Deflation
Monetary Policy
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
- Thema
-
monetary policy
P-Star
structural identification
Barnett critique
Geldpolitik
P-Star
strukturelle Identifikation
Barnett-Kritik
- Ereignis
-
Geistige Schöpfung
- (wer)
-
El-Shagi, Makram
Giesen, Sebastian
Kelly, Logan J.
- Ereignis
-
Veröffentlichung
- (wer)
-
Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
- (wo)
-
Halle (Saale)
- (wann)
-
2012
- Handle
- URN
-
urn:nbn:de:101:1-201212176783
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- El-Shagi, Makram
- Giesen, Sebastian
- Kelly, Logan J.
- Leibniz-Institut für Wirtschaftsforschung Halle (IWH)
Entstanden
- 2012
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