A Re-Examination Of Money And Business Cycles

<p>In the last several years, dynamic stochastic general equilibrium (DSGE) models have become the predominant tool of modern macroeconomics and, in particular, monetary policy research. Generally speaking, the basic New Keynesian model is the standard framework for analysis. This framework uses optimizing agents and firms to generate a dynamic, rational expectations model analogous to traditional IS-LM analysis in which the LM curve has been replaced with a monetary policy rule. As a result, the model makes a strong assumption about monetary policy. Namely, the New Keynesian model assumes that the short term interest rate is sufficient to capture the monetary transmission mechanism. Evidence that suggests that monetary aggregates are not useful for analysis of monetary shocks is viewed as prima facia evidence in favor of this view. Nonetheless, there remains cause for skepticism. This dissertation examines the implications of New Keynesian model in two important directions. First, the empirical evidence that examines the role of money relies on the use of simple sum aggregates, which are not consistent with aggregation theory. As a result, the dissertation re-examines previous results using monetary services indexes that are consistent with economic, aggregation, and index number theory. Second, the New Keynesian framework is nested in a model with agency costs and a richer specification of money demand than traditionally used to examine the implications of alternative transmission mechanisms.</p>

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Open Access Dissertation

Discipline thesis:degree_discipline

Economics

Year dc:date.available

2010

Author dc:creator

• Hendrickson, Joshua

Contributors dc:contributor

• Robert J. Rossana

• Economics

Repository record dc:identifier

https://digitalcommons.wayne.edu/oa_dissertations/166

OAI identifier oai:identifier

oai:digitalcommons.wayne.edu:oa_dissertations-1165