We thank Masao Ogaki (the editor), two anonymous referees, Peter Ireland, Andrew Levin, Takeo Hoshi, Jordi Gali, the participants of the TRIO 2008 conference and of several seminars for comments and suggestion, and Paolo Surico and Matteo Ciccarelli for helping us with the collection of the data. The financial support of the Spanish Ministry of Education through the grants SEJ2006-02235 and ECO2009-08556 and of the Barcelona Graduate School of Economics is gratefully acknowledged.
Does Money Matter in Shaping Domestic Business Cycles? An International Investigation
Article first published online: 18 MAY 2011
© 2011 The Ohio State University
Journal of Money, Credit and Banking
Volume 43, Issue 4, pages 577–607, June 2011
How to Cite
CANOVA, F. and MENZ, T. (2011), Does Money Matter in Shaping Domestic Business Cycles? An International Investigation. Journal of Money, Credit and Banking, 43: 577–607. doi: 10.1111/j.1538-4616.2011.00388.x
- Issue published online: 18 MAY 2011
- Article first published online: 18 MAY 2011
- Received August 3, 2009; and accepted in revised form January 3, 2011.
- business cycles;
- shock transmission;
- inflation dynamics
We study the contribution of money to business-cycle fluctuations in the United States, the United Kingdom, Japan, and the euro area using a small-scale structural monetary business cycle model. Constrained likelihood-based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks, and of the events of the last 40 years.