This paper reexamines both monthly and quarterly U.S. postwar data to investigate if the observed comovements between money, real interestrates, prices and output are compatible with the money-real interest-output link suggested by existing monetary theories of output, which include both...

The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based...

We set-up a real business cycle model with search and matching frictions driven by several shocks, which nests full Nash Bargaining and wage rigidity as special cases and includes other transmission mechanisms suggested by the literature for the propagation and amplification of disturbances. The...

The US Federal Reserve cut interest rates more vigorously in the recent recession than the European Central Bank did. By comparison with the Fed, the ECB followed a more measured course of action. We use an estimated dynamic general equilibrium model with financial frictions to show that...

More than fifty years ago, Friedman and Schwartz examined historical data for the United States and found evidence of pro-cyclical movements in the money stock, which led corresponding movements in output. We find similar correlations in more recent data; these appear most clearly when Divisia...

Financial intermediaries borrow in order to lend. When credit is increasing rapidly, the traditional deposit funding (core liabilities) is supplemented with other funding (non-core liabilities). We explore the hypothesis that monetary aggregates reflect the size of non-core and core liabilities...

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...

This paper examines the ability of a simple stylized general equilibrium model that incorporates nominal wage rigidity to explain the magnitude and persistence of the Great Depression in the United States. The impulses to our analysis are money supply shocks. The Taylor contracts model is...

The quality of the money stock declined during the banking crises of the early 1930s. Bank deposits did not serve as a secure short- term store of purchasing power for use in an emergency as well as they had previously, and during the periods of restricted deposits in late 1932 and early 1933,...

We test the hypothesis that the Great Contraction would have been attenuated had the Fed not allowed the money stock to decline. We do so by simulating a model that estimates separate relations for output and the price level and assumes that output and price dynamics are not especially sensitive...