TITLE

Rethinking the Implications of Monetary Policy: How a Transactions Role for Money Transforms the Predictions of Our Leading Models

AUTHOR(S)
THOMAS, JULIA K.
PUB. DATE
March 2009
SOURCE
Business Review (Federal Reserve Bank of Philadelphia);2009 First Quarter, p19
SOURCE TYPE
Trade Publication
DOC. TYPE
Article
ABSTRACT
The author calls for the inclusion of liquidity role of money in the New Keynesian model to determine the impact of interest rates to business activity. She defines liquidity effect as inverse relationship between short-term interest rates and the growth rate of aggregate money supply. She adds that link between money, interest rates, inflation and output predicts that interest rate increases when the money supply is expanded. She believes that the model fails to reproduce the liquidity effect because it has no emphasis on open market operations.
ACCESSION #
39349160

 

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