Abstract

A small, structural model of the monetary business cycle implies that real money balances enter into a correctly-specified, forward-looking IS curve if and only if they enter into a correctly-specified, forward-looking Phillips curve. The model also implies that empirical measures of real balances must be adjusted for shifts in money demand to accurately isolate and quantify the dynamic effects of money on output and inflation. Maximum likelihood estimates of the modelÕs parameters take both these considerations into account, but still suggest that money plays a minimal role in the monetary business cycle.

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 969-983
Launched on MUSE
2005-03-22
Open Access
No
Archive Status
Archived 2007
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