Endogenous Money or Sticky Prices?
NBER Working Paper No. 9390
What explains the correlations between nominal and real variables in the postwar US data? Are these correlations indicative of significant nominal price rigidity? Or do they simply reflect the particular way that monetary policymakers react to developments in the real economy? To answer these questions, this paper uses maximum likelihood to estimate a model of endogenous money. This model allows, but does not require, nominal prices to be sticky. The results show that nominal price rigidity, over and above endogenous money, plays a role in accounting for key features of the data.
Published: Ireland, Peter N. "Endogenous Money Or Sticky Prices?," Journal of Monetary Economics, 2003, v50(8,Nov), 1623-1648.