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- Title
MONETARY REGIMES, MONEY SUPPLY, AND THE USA BUSINESS CYCLE SINCE 1959: IMPLICATIONS FOR MONETARY POLICY TODAY.
- Authors
Hollander, Hylton; Christensen, Lars
- Abstract
The monetary authority's choice of operating procedure has significant implications for the role of monetary aggregates and interest rate policy on the business cycle. Using a dynamic general equilibrium model, we show that the type of endogenous monetary regime, together with the interaction between money supply and demand, does well to capture the actual behavior of a monetary economy—the USA. The results suggest that the evolution toward a stricter interest rate-targeting regime renders central bank balance sheet expansions ineffective. In the context of the 2007–2009 Great Recession, a more flexible interest rate-targeting regime would have led to a significant monetary expansion and more rapid economic recovery in the USA.
- Subjects
BUSINESS cycles; MONETARY policy; MONEY supply; DEMAND for money; ECONOMIC recovery; INTEREST rates
- Publication
Macroeconomic Dynamics, 2022, Vol 26, Issue 7, p1806
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100521000067