NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework

Matthew Canzoneri, Robert E. Cumby, Behzad Diba, David Lopez-Salido

NBER Working Paper No. 14244
Issued in August 2008
NBER Program(s):   IFM   ME

Woodford (2003) describes a popular class of neo-Wicksellian models in which monetary policy is characterized by an interest-rate rule, and the money market and financial institutions are typically not even modeled. Critics contend that these models are incomplete and unsuitable for monetary-policy evaluation. Our Banks and Bonds model starts with a standard neo-Wicksellian model and then adds banks and a role for bonds in the liquidity management of households and banks. The Banks and Bonds model gives a more complete description of the economy, but the neo-Wicksellian model has the virtue of simplicity. Our purpose here is to see if the neo-Wicksellian model gives a reasonably accurate account of macroeconomic behavior in the more complete Banks and Bonds model. We do this by comparing the models' second moments, variance decompositions and impulse response functions. We also study the role of monetary aggregates and velocity in predicting inflation in the two models.

download in pdf format
   (230 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14244

Published: Matthew Canzoneri & Robert Cumby & Behzad Diba & David Lãpez-Salido, 2008. "Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1667-1698, December. citation courtesy of

Users who downloaded this paper also downloaded these:
Jaffee, Kunreuther, and Michel-Kerjan w14210 Long Term Insurance (LTI) for Addressing Catastrophe Risk
Coibion and Gorodnichenko w14621 Monetary Policy, Trend Inflation and the Great Moderation: An Alternative Interpretation
Arkolakis w14214 Market Penetration Costs and the New Consumers Margin in International Trade
Draca, Machin, and Van Reenen w13996 Minimum Wages and Firm Profitability
Kaminsky w14249 Crises and Sudden Stops: Evidence from International Bond and Syndicated-Loan Markets
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us