SHERP

Monetary Policy and Economic Activity in Japan, Korea, and the United States

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Authors
Braun, R. Anton; Shioji, Etsuro
Issue Date
2005
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 19 (No. 1 2006): 111-146
Keywords
Monetary policy; Economic activity; Japan; United States
Abstract
A cornerstone of central bank policy is that a looser monetary policy is associated with lower interest rates, higher growth of narrow monetary aggregates, higher output and higher inflation. These responses, which we collectively refer to as the liquidity effect hypothesis, are commonly maintained in practice but are at odds with some leading models of money. This paper proposes and implements a methodology for assessing the liquidity effect hypothesis with two other hypotheses: The costly price adjustment hypothesis and the inflation tax hypothesis. We find surprisingly little support for the liquidity effect hypothesis in Japanese or U.S. data. The liquidity effect hypothesis receives its strongest support in Korean data.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1348
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.19(1) (Spring 2006)
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