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WORKING PAPER SERIES Estimates of the Link Between Variable Money Growth and GNP: A Supplement to Mascaro and Meltzer Michael T. Belongia Working Paper 1984-008A http://research.stlouisfed.org/wp/1984/1984-008.pdf 1984 FEDERAL RESERVE BANK OF ST. LOUIS Research Division 411 Locust Street St. Louis, MO 63102 ______________________________________________________________________________________ The views expressed are those of the individual authors and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the Board of Governors. Federal Reserve Bank of St. Louis Working Papers are preliminary materials circulated to stimulate discussion and critical comment. References in publications to Federal Reserve Bank of St. Louis Working Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors. Photo courtesy of The Gateway Arch, St. Louis, MO. www.gatewayarch.com

Estimates of the Link Between Variable Money Growth and ... · Esti~ates of the Link Retween Varfa5le Money Growth 3nd GNP: A 4uppPement to Mascaro 2nd Meltzer Mich3el T. Belongi

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WORKING PAPER SERIES

Estimates of the Link Between Variable Money Growth and GNP: A Supplement

to Mascaro and Meltzer

Michael T. Belongia

Working Paper 1984-008A http://research.stlouisfed.org/wp/1984/1984-008.pdf

1984

FEDERAL RESERVE BANK OF ST. LOUIS Research Division 411 Locust Street

St. Louis, MO 63102 ______________________________________________________________________________________

The views expressed are those of the individual authors and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis, the Federal Reserve System, or the Board of Governors.

Federal Reserve Bank of St. Louis Working Papers are preliminary materials circulated to stimulate discussion and critical comment. References in publications to Federal Reserve Bank of St. Louis Working Papers (other than an acknowledgment that the writer has had access to unpublished material) should be cleared with the author or authors.

Photo courtesy of The Gateway Arch, St. Louis, MO. www.gatewayarch.com

E s t i ~ a t e s of t h e Link Retween Varfa5le Money Growth 3nd GNP: A 4uppPement

t o Mascaro 2nd Meltzer

Mich3el T. Belongi I

Feders l Reserve 3ank of S t . Louis 84-00 8

Tne views axpressed he re a r e tilose of t h e a u t h o r s " a d do no t r e f l e c t those of t h e Federa l Reserve Rank of S t . Louis o r t h e Board of Governors of t h e Federa l Reserve 4ystem. Not t o be quoted v-Ltt.lout au tho r s ' perrnlssion.

ABSTRACT

Yascaro and Mebtzer hsve i a p l i e d , b u t n o t t e s t e d , t l ~ s t increased unce r t a in ty shout monetary pol icy w i l l reduce real. income. nis propos i t i on i s t e s t e d 3 i r e c t l v 5 y adding 3. {Calman f i l t e r e s t ima te of monetary unce r t a in ty t o 3 S t . Louis-type GNP equat ion. me r e s u l t s i n d i c a t e t h 2 t -i lcreased unce r t a in ty .,:,out monetary pol tcy has perw3nent negat ive e f f e c t s on both the l e v e l and growth r a t e of GNP.