The Own-Price of Money and a New Channel of Monetary Transmission

25 Pages Posted: 17 Nov 2002 Last revised: 30 Oct 2010

See all articles by Michael T. Belongia

Michael T. Belongia

University of Mississippi - Department of Economics

Peter N. Ireland

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: November 2002

Abstract

Traditionally, the effects of monetary policy actions on output are thought to be transmitted via monetary or credit channels. Real business cycle theory, by contrast, highlights the role of real price changes as a source of revisions in spending and production decisions. Motivated by the desire to focus on the effects of price changes in the monetary transmission mechanism, this paper incorporates a direct measure of the real own-price of money into an estimated vector autoregression and a calibrated real business cycle model. Consistent with this new view of the monetary transmission mechanism, both approaches reveal that movements in the own-price of money are strongly related to movements in output.

Suggested Citation

Belongia, Michael T. and Ireland, Peter N., The Own-Price of Money and a New Channel of Monetary Transmission (November 2002). NBER Working Paper No. w9341. Available at SSRN: https://ssrn.com/abstract=351433

Michael T. Belongia

University of Mississippi - Department of Economics ( email )

371 Holman Hall
University, MS 38677
United States

Peter N. Ireland (Contact Author)

Boston College - Department of Economics ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States
617-552-3687 (Phone)
617-552-2308 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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