Unanticipated Money, Output, and the Price Level in the United States | Zendy

Robert J. Barro | Zendy

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Unanticipated Money, Output, and the Price Level in the United States

Author(s) -

Robert J. Barro

Publication year - 1978

Publication title -

journal of political economy

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 21.034

H-Index - 186

eISSN - 1537-534X

pISSN - 0022-3808

DOI - 10.1086/260699

Subject(s) - economics , gdp deflator , inflation (cosmology) , price level , monetary economics , moneyness , lag , econometrics , deflation , monetary policy , real gross domestic product , computer network , physics , theoretical physics , computer science

Earlier analysis of unanticipated money growth is extended to output (GNP) and the price level (GNP deflator) for recent U.S. experience. Price level determination is more complicated than output determination, because both anticipated and unanticipated money movements are involved. Empirical results accord well with the model--notably, they support the key hypothesis of a one-to-one, contemporaneous link between anticipated money and the price level. Precise estimates are obtained for the lagged responses of output and prices to unanticipated money movements. Cross-equation comparisons indicate that the price response to unanticipated money movements has a longer lag than the output response. A form of lagged adjustment in money demand can account for this difference. The forecasts for inflation average 5.5 percent per year for 1977-80.

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