Putting "M" Back in Monetary Policy

By Eric M. Leeper, Jennifer E. Roush. 2003

217 citations recorded by the source corpus.

Money demand and the stock of money have all but disappeared from monetary policy analyses. Remarkably, it is more common for empirical work on monetary policy to include commodity prices than to include money. This paper establishes and explores the empirical fact that whether money enters a model and how it enters matters for inferences about policy impacts. The way money is modeled significantly changes the size of output and inflation effects, and the degree of inertia that inflation exhibits following a policy shock. We offer a simple and conventional economic interpretation of these empirical facts.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4b4409f94aa58be9f4ad636fa7ec5ed6568bbaf4

Citations in the corpus

• The Impact of the Volatility of Monetary Policy Shocks (2013, unknown): “As argued in Leeper and Roush (2003), having a measure of money helps in the identification of the monetary policy shock.”
• Fluctuating Macro Policies and the Fiscal Theory [with Comments and Discussion] (2005, unknown): “8Ireland (2001), Leeper and Zha (2001), Leeper and Roush (2003), and Sims and Zha (2006) argue that allowing money growth to enter the monetary policy rule is important for identifying policy behavior.”