Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56258
Authors: 
Favara, Giovanni
Giordani, Paolo
Year of Publication: 
2002
Series/Report no.: 
SSE/EFI Working Paper Series in Economics and Finance 514
Abstract: 
New Keynesian models of monetary policy assign no role to monetary aggregates, in the sense that the level of output, prices, and interest rates can be determined without knowledge of the quantity of money. We evaluate the empirical validity of this prediction by studying the effects of shocks to monetary aggregates using an identified VAR. Shocks to monetary aggregates are isolated by means of identifying restrictions suggested by this class of models. Contrary to the theoretical predictions, shocks to broad monetary aggregates have substantial and persistent effects on output and prices.
Subjects: 
New-Keynesian models
LM shocks
VAR
Block-exogeneity
JEL: 
E31
E52
E58
Document Type: 
Working Paper

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