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US Volatility Cycles of Output and Inflation, 1919-2004: A Money and Banking Approach to a Puzzle

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Author Info
Benk, Szilárd
Gillman, Max
Kejak, Michal

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Abstract

The post-1983 moderation coincided with an ahistorical divergence in the money aggregate growth and velocity volatilities away from the downward trending GDP and inflation volatilities. Using an en dogenous growth monetary DSGE model, with micro-based banking production, enables a contrasting characterization of the two great volatility cycles over the historical period of 1919-2004, and enables this puzzle to be addressed more easily. The volatility divergence is explained by the upswing in the credit volatility that kept money supply variability from translating into inflation and GDP volatility.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7150.

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Date of creation: Jan 2009
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Handle: RePEc:cpr:ceprdp:7150

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Related research
Keywords: Growth; Inflation; Money and credit shocks; Volatility;

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Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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