In this paper, we re-examine the relationship between money and interest rates with a focus on the past few years, when … bound. Standard money-demand theory indicates that in such cases the interest elasticity of money demand should rise sharply …

In this paper, we re-examine the relationship between money and interest rates with a focus on the past few years, when … bound. Standard money-demand theory indicates that in such cases the interest elasticity of money demand should rise sharply …

-shock specification, we identify, using sign restrictions, two policy shocks, monetary and fiscal, and two non-policy shocks, demand and … supply. We obtain the following results. (ii) Both supply and demand shocks are important sources of fluctuations; supply … prevails for GDP, while demand prevails for employment and inflation. (ii) Monetary and fiscal policy shocks have sizable …