The Financial-Real Interaction and Investment in the Business Cycle: Theory and Empirical Evidence

Abstract

For a long time contributions to monetary economics have focused on the monetary-real interaction. There is nowadays a considerable body of literature on the impact of monetary aggregates on aggregate economic activity. The monetary view of the impact of the variation of monetary aggregates on real output has been put forward by the work of Friedman and Schwartz (1963) and thereafter evidence was generated that monetary aggregates can contribute to economic fluctuations. The money-real output relation has also been taken up by Keynesian oriented studies along the Kaldorian line of endogenous money where, however, the money-real interaction is seen to be considerably weaker than in monetarist versions. 1 These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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