DP8107 Does money matter in shaping domestic business cycles? An international investigation
|Author(s):||Fabio Canova, Tobias Menz|
|Publication Date:||November 2010|
|Keyword(s):||business cycles, inflation dynamics, Money, shock transmission|
|JEL(s):||E31, E32, E52|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=8107|
We study the contribution of money to business cycle fluctuations in the US, the UK, Japan, and the Euro area using a small scale structural monetary business cycle model. Constrained likelihood-based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks and of the events of the last 40 years.