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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Putting 'M' Back in Monetary Policy
Eric M. Leeper; Jennifer E. Roush
2003-761  (February 2003, latest version May 2003)

Abstract:  Money demand and the stock of money have all but disappeared from monetary policy analyses. Remarkably, it is more common for empirical work on monetary policy to include commodity prices than to include money. This paper establishes and explores the empirical fact that whether money enters a model and how it enters matters for inferences about policy impacts. The way money is modeled significantly changes the size of output and inflation effects and the degree of inertia that inflation exhibits following a policy shock. We offer a simple and conventional economic interpretation of these empirical facts.

Full paper, latest version (1063 KB PDF)
Original version (1108 KB PDF)

Keywords
monetary policy transmission, money demand, money market, monetary policy rules, identified VAR

As Published Elsewhere
forthcoming Journal of Money, Credit, and Banking

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Last update: May 5, 2003