Putting 'M' Back in Monetary Policy

48 Pages Posted: 13 Mar 2003 Last revised: 8 Aug 2022

See all articles by Eric M. Leeper

Eric M. Leeper

Indiana University at Bloomington - Department of Economics; University of Virginia ; National Bureau of Economic Research (NBER)

Jennifer E. Roush

Board of Governors of the Federal Reserve System

Date Written: March 2003

Abstract

Money demand and the stock of money have all but disappeared from monetary policy analyses. This paper is an empirical contribution to the debate over the role of money in monetary policy analysis. The paper models supply and demand interactions in the money market and finds evidence of an essential role for money in the transmission of policy. Across sub-samples, it finds evidence consistent with the following inferences: (1) the money stock and the interest rate jointly transmit monetary policy; (2) for a given exogenous change in the nominal interest rate, the estimated impact of policy on economic activity increases monotonically with the response of the money supply; (3) the path of the real rate is not sufficient for determining policy impacts.

Suggested Citation

Leeper, Eric Michael and Leeper, Eric Michael and Roush, Jennifer E., Putting 'M' Back in Monetary Policy (March 2003). NBER Working Paper No. w9552, Available at SSRN: https://ssrn.com/abstract=386181

Eric Michael Leeper (Contact Author)

Indiana University at Bloomington - Department of Economics ( email )

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University of Virginia ( email )

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Jennifer E. Roush

Board of Governors of the Federal Reserve System ( email )

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202-263-4850 (Fax)

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