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DOES MONEY MATTER IN THE IS CURVE? THE CASE OF THE UK
Author(s) -
JONES BARRY E.,
STRACCA LIVIO
Publication year - 2008
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2008.01081.x
Subject(s) - divisia index , economics , explanatory power , econometrics , consumption (sociology) , divisia monetary aggregates index , monetary economics , monetary policy , quantitative easing , statistics , mathematics , central bank , epistemology , sociology , energy (signal processing) , energy intensity , social science , philosophy
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.