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Money and Output: Friedman and Schwartz Revisited

Michael T. Belongia, Peter N. Ireland

NBER Working Paper No. 21796
Issued in December 2015
NBER Program(s):The Monetary Economics Program

More than fifty years ago, Friedman and Schwartz examined historical data for the United States and found evidence of pro-cyclical movements in the money stock, which led corresponding movements in output. We find similar correlations in more recent data; these appear most clearly when Divisia monetary aggregates are used in place of the Federal Reserve’s official, simple-sum measures. When we use information in Divisia money to estimate a structural vector autoregression, identified monetary policy shocks appear to have large and persistent effects on output and prices, with a lag that has lengthened considerably since the early 1980s.

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Document Object Identifier (DOI): 10.3386/w21796

Published: MICHAEL T. BELONGIA & PETER N. IRELAND, 2016. "Money and Output: Friedman and Schwartz Revisited," Journal of Money, Credit and Banking, vol 48(6), pages 1223-1266. citation courtesy of

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