Reconsidering the Role of Money for Output, Prices, and Interest Rates: With the Data from Korea
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The New Keynesian model of monetary policy predicts no role of monetary aggregates; that is, the quantity of money is not a determinant of the equilibrium levels of output, prices, and interest rates. Recently, Favara and Giordani (2009)evaluated the empirical validity of this prediction by estimating the effects of monetary shocks on other macroeconomic variables using a vector autoregression (VAR) analysis. Their empirical results provide evidence against the New Keynesian monetary model. In this paper, we apply their estimation method to the data from South Korea. Differently from theirs, our empirical results indicate that monetary shocks have little predictive power for output, price, and interest rate, as the New Keynesian models predict. This finding suggests that the role of money may be country-specific.
Abstract
The New Keynesian model of monetary policy predicts no role of monetary aggregates; that is, the quantity of money is not a determinant of the equilibrium levels of output, prices, and interest rates. Recently, Favara and Giordani (2009)evaluated the empirical validity of this prediction by estimating the effects of monetary shocks on other macroeconomic variables using a vector autoregression (VAR) analysis. Their empirical results provide evidence against the New Keynesian monetary model. In this paper, we apply their estimation method to the data from South Korea. Differently from theirs, our empirical results indicate that monetary shocks have little predictive power for output, price, and interest rate, as the New Keynesian models predict. This finding suggests that the role of money may be country-specific.
참고문헌 (15)
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