The Barnett Critique After Three Decades: A New Keynesian Analysis

No 17885, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper extends a New Keynesian model to include roles for currency and deposits as competing sources of liquidity services demanded by households. It shows that, both qualitatively and quantitatively, the Barnett critique applies: While a Divisia aggregate of monetary services tracks the true monetary aggregate almost perfectly, a simple-sum measure often behaves quite differently. The model also shows that movements in both quantity and price indices for monetary services correlate strongly with movements in output following a variety of shocks. Finally, the analysis characterizes the optimal monetary policy response to disturbances that originate in the financial sector.

JEL-codes: C43 E32 E41 E52 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-mac and nep-mon
Note: ME
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Citations: View citations in EconPapers (16)

Published as “The Barnett Critique After Three Decades: A New Keynesian Analysis” (co-authored with Michael T. Belongia), Journal of Econometrics, forthcoming.

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Related works:
Journal Article: The Barnett critique after three decades: A New Keynesian analysis (2014)
Working Paper: The Barnett Critique After Three Decades: A New Keynesian Analysis (2010)
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