The money-output relationship : a disaggregated approach

This dissertation addresses two issues related to identifying the impact of money on economic activity using disaggregated monetary and real variables. The first is the negative impact of money on interest rates (the liquidity effect). The first step in doing so is to distinguish between exogenous and endogenous money movements. The second is identifying the transmission mechanism by which interest rates affect economic activity. Recent empirical work on the relationship between money and economic activity using the Vector Auto Regression (VAR) method has focused on relationships between aggregate monetary and aggregate real variables. The difficulty in using aggregated data is that some aggregate variables consist of components that have different determinants or different time patterns in their interaction with other variables. The positive correlation between money and interest rates, and between interest rates and investment that have been found by many empirical studies are inconsistent with theories of the liquidity effect of money and the transmission mechanism with interest rate channels. The main argument in this dissertation is that distinguishing between outside and inside money and between residential and nonresidential investment is crucial for identifying the impact of money and interest rates on economic activity. Following the recent trend in studying the relationship between money and output, the VAR method is applied here. This dissertation, however, departs from most of the previous work specifically by dealing with the problem of nonstationarity and cointegration in the data series. The presence of nonstationarity and cointegration found in the data requires the use of the Error Correction (EC) model to estimate the dynamic short-run relationships between the variables. The main conclusion of this study is that exogenous money shocks are correctly measured by nonborrowed reserves (NBR). Movements in NBR produce the expected negative impact of money on interest rates (the liquidity effect) and reflect, to a large extent, the Fed\u27s leaning against the wind policy. Disaggregating investment, on the other hand, helps to detect the transmission mechanism by which interest rates affect economic activity. Particularly, the transmission mechanism works through the effect of interest rates on the residential component of investment. Further, the evidence presented in this dissertation underscores the role of residential investment in explaining business cycle fluctuations

Survey of the Labor Market for New Ph.D. Hires in Economics 2001-2002

This year, the survey questionnaire was sent to 361 organizations. Questionnaires were returned by 135 (37.4 percent) for a response rate that was lower than the 2000-01 survey response rate of 48.2 percent. Twenty-two responses for this year’s survey were received significantly after the deadline and not included in the results. However, an updated version will include the late responses and will be posted on our web site at http://www.uark.edu/depts/cberinfo/aea/. Of this year\u27s responses, 93 (68.9 percent) were from those who responded to last year\u27s survey; 42 (31.1 percent) came from new respondents. Among the academic institutions responding, the highest degree offered was: Ph.D.- 51.8 percent; Master - 11.8 percent; Bachelor - 28.2 percent. The remaining 11.1 percent did not indicate their highest degree offered. One of the responders was a non-academic organization. The responses are reported for all respondents (including non-academic institutions and schools that did not report highest degree offered ), and separately for Ph.D. degree-granting institutions and for schools whose highest degree offered is the Bachelor or Master degree. Data for institutions in the National Research Council\u27s Research Doctorate Report, 1995, are reported as a subset of Ph.D. degree-granting schools. They are referred to as the Top 30

The liquidity effect and the transmission mechanism of money

The positive relationship between money and interest rates and the procyclical behaviour of interest rates found by empirical studies contradict predictions of macroeconomic theories. This paper incorporates disaggregated measures of investment (residential and nonresidential investment) along with disaggregated measures of money (outside and inside money) into the analysis of the impact of money on economic activity. The Vector Error Correction model is employed to deal with the issues of stationarity and cointegration in the data. Disaggregating money and output produces the expected liquidity effect of money on interest rates and helps to detect the transmission mechanism by which interest rates affect real economic activity. Further, the evidence presented in this paper underscores the importance of Residential Fixed Investment as a major player in explaining the money-output relationship.

Survey of the Labor Market for New Ph.D. Hires in Economics 2001-2002

This year, the survey questionnaire was sent to 361 organizations. Questionnaires were returned by 135 (37.4 percent) for a response rate that was lower than the 2000-01 survey response rate of 48.2 percent. Twenty-two responses for this year’s survey were received significantly after the deadline and not included in the results. However, an updated version will include the late responses and will be posted on our web site at http://www.uark.edu/depts/cberinfo/aea/. Of this year\u27s responses, 93 (68.9 percent) were from those who responded to last year\u27s survey; 42 (31.1 percent) came from new respondents. Among the academic institutions responding, the highest degree offered was: Ph.D.- 51.8 percent; Master - 11.8 percent; Bachelor - 28.2 percent. The remaining 11.1 percent did not indicate their highest degree offered. One of the responders was a non-academic organization. The responses are reported for all respondents (including non-academic institutions and schools that did not report highest degree offered ), and separately for Ph.D. degree-granting institutions and for schools whose highest degree offered is the Bachelor or Master degree. Data for institutions in the National Research Council\u27s Research Doctorate Report, 1995, are reported as a subset of Ph.D. degree-granting schools. They are referred to as the Top 30