Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153338 
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper No. 904
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Narrow and broad money measures (including Divisia aggregates) have been found to have explanatory power for UK output in backward-looking specifications of the IS curve. In this paper, we explore whether or not real balances enter into a forward-looking IS curve for the UK, building on the theoretical framework of Ireland (2004). To do this, we test for additive separability between consumption and money over a sizeable part of the post-ERM period using non-parametric methods. If consumption and money are not additively separable, then real money balances enter into the forward-looking IS curve (the converse does not hold, however). A main finding is that the UK data seem to be broadly consistent with additive separability for the the more recent period from 1999 to 2007.
Subjects: 
Additive Separability
Divisia Monetary Aggregates
IS Curve
measurement error
Non-Parametric Tests
JEL: 
C14
C43
C63
E21
E41
Document Type: 
Working Paper

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