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  3. American Economic Review
  4. December 2000
  5. Monetary Aggregates and Output

Monetary Aggregates and Output

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Abstract

We ask whether the following observations may result from endogenously determined fluctuations in the money multiplier rather than a causal influence of money on output: (i) M1 is positively correlated with real output; (ii) the money multiplier and deposit-to-currency ratio are positively correlated with output; (iii) the price level is negatively correlated with output; (iv) the correlation of M1 with contemporaneous prices is substantially weaker than the correlation of M1 with real output; (v) correlations among real variables are essentially unchanged under different monetary-policy regimes; and (vi) real money balances are smoother than money-demand equations would predict.

Citation

Freeman, Scott, and Finn E. Kydland. 2000. "Monetary Aggregates and Output." American Economic Review, 90 (5): 1125-1135. DOI: 10.1257/aer.90.5.1125

JEL Classification

  • E32 Business Fluctuations; Cycles
  • E51 Money Supply; Credit; Money Multipliers