DOES MONEY MATTER IN THE IS CURVE? THE CASE OF THE UK

Barry E. Jones · Livio Stracca

17 citations0/0 files storedManchester School

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Monetary Policy and Economic Impact Economic Theory and Policy Economic theories and models

Abstract

Narrow and broad money measures (including Divisia aggregates) have been found to have explanatory power for UK output in backward‐looking specifications of the IS curve. In this paper, we explore whether or not real balances enter into a forward‐looking IS curve for the UK. To do this, we test for additive separability between consumption and money over a sizeable part of the post‐Exchange Rate Mechanism period using non‐parametric methods. A main finding is that the UK data seem to be broadly consistent with additive separability for the more recent period from 1999 to 2007.

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References

1982The Nonparametric Approach to Demand Analysis 1980Economic monetary aggregates an application of index number and aggregation theory 1982Intertemporal Substitution in Macroeconomics 1983Non-Parametric Tests of Consumer Behaviour 1997An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis 1978The user cost of money 1999An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis 2007How Important Is Money in the Conduct of Monetary Policy?

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