DO MONETARY AGGREGATES BELONG IN A MONETARY MODEL? EVIDENCE FROM THE UK
Conventional monetary models focus on interest rates and omit monetary aggregates from policy discussions. This paper examines whether augmenting the measure of monetary policy with monetary aggregates helps determine more robust links between policy and economic fluctuations. After constructing the...
| Published in: | Buletin Ekonomi Moneter dan Perbankan |
|---|---|
| Main Author: | |
| Format: | Article |
| Language: | English |
| Published: |
Bank Indonesia
2020-01-01
|
| Subjects: | |
| Online Access: | https://www.bmeb-bi.org/index.php/BEMP/article/view/1184 |
| Summary: | Conventional monetary models focus on interest rates and omit monetary aggregates
from policy discussions. This paper examines whether augmenting the measure of
monetary policy with monetary aggregates helps determine more robust links between
policy and economic fluctuations. After constructing the Divisia money index for the
UK, I employ structural vector autoregression to identify two different UK monetary
policy regimes. Inclusion of this (correct) measure of money and disentangling the
money supply from demand resolve the price and liquidity puzzles. The results point
to the informational content embedded in monetary aggregates, suggesting they
should be taken into account in evaluations of monetary policy. |
|---|---|
| ISSN: | 1410-8046 2460-9196 |