Outside money, inside money, and monetary policy: New evidence on the interactions between key monetary variables and output.

摘要

This dissertation investigates the nature of the short run relationships between key monetary variables and output. The question of whether or not money and monetary policy have significant short run effects on output represents the bone of contention in the long lasting debates between the competing schools of macroeconomic thought. The empirical studies aimed to assess the relevance of the competing theories provide contradictory evidence. It is argued in this dissertation that the majority of these studies fail to address properly a number of methodological issues. These include the analytical distinctions outside money vs. inside money and monelary policy vs. changes in the money stock. The research here fills these gaps in the empirical literature.; Parts Two through Four focus in turn on particular dimensions of the relationships between the monetary and the real sector. These relationships are examined by means of impulse response functions and forecast error variance decompositions, derived from structural vector error-correction models. Additional information is provided by Granger-causality and superexogenity tests.; Part Two focuses on the short run relationship between money and output. The money stock is decomposed into outside money, created by the monetary authorities, and inside money, created by the banking system. The direction and the relative magnitude of the mutual impacts among the components of the money stock and output are investigated.; Part Three switches the focus on the relationship between monetary policy and output. Intentional monetary policy actions are identified as the proportion of non-borrowed reserves in total reserves of the banking system. The investigation aims to assess the effectiveness of policy actions for output stabilization.; In Part Four a theoretical hypothesis is formulated and subjected to empirical testing. This hypothesis assigns portfolio redistributions among monetary assets an important role in explaining the observed patterns of monetary and output dynamics. Under this hypothesis, the empirical evidence on the interactions between outside money, the money multiplier, and output is reexamined.; The general conclusions of this study are that monetary policy actions are likely to be ineffective for output stabilization, and that the interactions between the key monetary variables and output are weak.