TY  - JOUR
AU  - Canzoneri,Matthew
AU  - Cumby,Robert E.
AU  - Diba,Behzad
AU  - Lopez-Salido,David
TI  - Monetary Aggregates and Liquidity in a Neo-Wicksellian Framework
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14244
PY  - 2008
Y2  - August 2008
UR  - http://www.nber.org/papers/w14244
L1  - http://www.nber.org/papers/w14244.pdf
N1  - Author contact info:
Matthew Canzoneri
Department of Economics
Georgetown University
Washington, DC   20057
Tel: 202-687-5911
E-Mail: canzonem@georgetown.edu

Robert E. Cumby
Georgetown University
School of Foreign Service
Washington, DC 20057-1045
Tel: 202/687-2990
Fax: 202/687-6102
E-Mail: cumbyr@georgetown.edu

Behzad Diba
Department of Economics
Georgetown University
Washington, DC  20057
Tel: 202-687-5682
Fax: 202-687-6102
E-Mail: dibab@georgetown.edu

David Lopez-Salido
Federal Reserve Board
Mail Stop 76, Monetary Affairs
20th and C Streets, N.W.
Washington, DC 20551
Tel: 202 452 2566
E-Mail: David.J.Lopez-Salido@frb.gov
AB  - 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.
ER  -