The Money View Versus the Credit View

Baker, Sarah S.; López‐Salido, David; Nelson, Edward

doi:10.17016/feds.2018.042

Cited by 7 publications

(2 citation statements)

References 11 publications

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“…This is known as the "credit view". In contrast, Baker et al (2018) provide new evidence in favour of the "money view" of Friedman and Schwartz (1963), where broad money aggregates outperform credit aggregates in predicting economic downturns. In either case, credit is essential for determining the financial cycle, and this in turn has important implications for real economic activity.…”

Section: Discussion and Policy Implicationsmentioning

confidence: 79%

On the Direction of Causality between Business and Financial Cycles

Tsiakas,

Zhang

2023

JRFM

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This paper investigates whether business cycles cause financial cycles or vice versa. We also assess whether the US plays a leading role in causing the domestic business and financial cycles of other countries. The literature has established that business and financial cycles are linked through several channels such as credit constraints, the real effects of financial information and the reversal of overoptimistic expectations. Our analysis evaluates the direction of Granger causality using a novel approach based on the mixed-frequency vector autoregression model for the G7 countries. Our approach exploits the fact that real economic activity measured by industrial production is observed at a higher frequency than aggregate credit. We find strong evidence of bidirectional causality between the business and financial cycles, especially in recessions. Furthermore, the US is a global leader since the US business cycle significantly affects other countries’ business cycles, especially in terms of expansions.

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Section: Discussion and Policy Implicationsmentioning

confidence: 79%

On the Direction of Causality between Business and Financial Cycles

Tsiakas,

Zhang

2023

JRFM

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“…Douglas and Raudla go on to explain that monetary growth is essential to the achievement of economic growth and development, and to avoid recession (Baker, Lopez-Salido, and Nelson 2018;Boettger 1994;Keen 2011). Some 85 years ago, Keynes (1936) argued that spending drives the modern economy (especially investment spending).…”

Section: The Nature Of Money and Its Relation To The Statementioning

confidence: 99%

Post‐Keynesian Public Budgeting & Finance: Assessing Contributions From Modern Monetary Theory

Кравчук¹

2020

Public Budgeting & Finance

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While Modern Monetary Theory (MMT) offers contributions that are worthy of serious consideration, some additional theory‐building and synthesis with existing theory may be in order to tie MMT into the established budgeting literature. MMT focuses primarily on monetarily sovereign governments. These are governments that face extremely “soft” budget constraints insofar as they: issue and regulate the value of their own currencies, possess central banks that function as the fiscal agents of their government treasuries, are able to issue sovereign debt denominated in their domestic currency, and operate in a system of freely‐floating currency exchange rates, with a minimum of currency and capital controls. National governments that are sovereign according to these criteria are able to make all debt service payments as they come due, virtually without regard to their level of outstanding debt; they cannot be forced to default against their will. They are also macroeconomically‐autonomous. It is the collective position of the symposium papers that these conditions describe, in precise terms, the fiscal position of the U.S. federal government. As such, the existence of an ultra‐soft U.S. government budget constraint is grounded in the extremely favorable conditions of money and credit that the federal government is subject to, and which in fact it has created and nurtured for itself since the Second World War. An important implication is that the federal level budgeting literature cannot ignore the macroeconomics and the administration of a sovereign currency regime, nor the monetary economics that ungirds it, without sustaining charges of unrealism.

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Is deflation costly after all? The perils of erroneous historical classifications

Kaufmann

2020

J of Applied Econometrics

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Summary I estimate average economic activity during periods of inflation and deflation while accounting for measurement errors in 19th century prices. These measurement errors lead to underestimation (overestimation) of economic activity during periods of inflation (deflation). By exploiting multiple deflation indicators, it is possible to recover the true relationship; the shortfall of US industrial production growth during periods of deflation ranges from −4.5 pp to −7.6 pp, instead of −2 pp. I also find a negative relationship between deflation and real activity in the UK. I then examine the cross‐country variation in the estimates for eleven countries. The patterns are consistent with stronger biases for countries with more serious measurement errors in prices.

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The Money View Versus the Credit View

Cited by 7 publications

References 11 publications

On the Direction of Causality between Business and Financial Cycles

On the Direction of Causality between Business and Financial Cycles

Post‐Keynesian Public Budgeting & Finance: Assessing Contributions From Modern Monetary Theory

Is deflation costly after all? The perils of erroneous historical classifications

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