Anticipated Money, Inflation Uncertainty, and Real Economic Activity

John H. Makin

NBER Working Paper No. 760 (Also Reprint No. r0261)
Issued in September 1981
NBER Program(s):Monetary Economics

This paper critically examines a number of maintained hypotheses that are necessarily being tested along with the basic notion derived from the rational expectations (RE) formulation of Lucas (1972) (19 73) that "only unanticipated money matters." The trend stationary representation of secular real output of Lucas and others is replaced by a difference stationary representation found by Nelson and Plosser (1980) to be consistent with U. S. historical data. The impact of inflation uncertainty on real activity is considered. Attention is paid to possible mis-measurement of agents' ex ante -- anticipated money growth. It is found that three alternative measures of anticipated money growth produce a stable impact on growth of output and employment. Contemporaneous and lagged values of unanticipated money growth have no significant additional explanatory power in the presence of any one of the three measures of anticipated money growth. Beyond this, it is impossible to reject the hypothesis that the initial positive real impact of anticipated money is not temporary. Inflation uncertainty is found to act as a significant depressant of real economic activity in the presence of all tested combinations of anticipated and unanticipated money growth.

download in pdf format
   (315 K)

download in djvu format
   (252 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0760

Published: Makin, John H. "Anticipated Money, Inflation Uncertainty, and Real Economic Activity." The Review of Economics and Statistics, Vol. LXIV, No. 1, (February 1982), pp. 126-134. citation courtesy of

Users who downloaded this paper also downloaded* these:
Barro and Rush Unanticipated Money and Economic Activity
Mishkin w0506 Does Anticipated Monetary Policy Matter? An Econometric Investigation
Wieland w15565 Quantitative Easing: A Rationale and Some Evidence from Japan
Buiter w0601 Real Effects of Anticipated and Unanticipated Money: Some Problems of Estimation and Hypothesis Testing
Makin w0818 Real Interest, Money Surprises and Anticipated Inflation
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us