Exam 23: Transmission Mechanisms of Monetary Policy: The Evidence

In the late 1990s and early 2000s,the Japanese economy has experienced

If monetary policy can influence ________ prices and conditions in ________ markets,then it can affect spending through channels other than the traditional interest-rate channel.

Milton Friedman and Anna Schwartz showed that monetary policy during the Great Depression had

Explain the traditional interest-rate channel for expansionary monetary policy.Explain how a tight monetary policy affects the economy through this channel.

Economic theory suggests that ________ interest rates are ________ important than ________ interest rates in explaining investment behavior.

The monetarist reduced-form evidence does not specify the working of the economy and thus is considered to be a

Tobin's q is defined as the market value of firms ________ the replacement cost of capital.

According to Tobin's q theory,when q is ________,firms will not purchase new investment goods because the market value of firms is ________ relative to the cost of capital.

One of the best examples of an episode in which a change in monetary policy appears to have been an exogenous event is the ________ in reserve requirements in ________.

The ________ held the view that monetary policy does not matter at all for movements in aggregate output.

Early Keynesians concluded that changes in monetary policy had no impact on aggregate output because early empirical studies found no linkage between movements in ________ and ________.

During the Great Depression,Tobin's q

The monetarist statistical evidence examines the correlations between both ________ and ________ with ________.

Reverse causation between money and aggregate output is likely to be a problem when a central bank targets

According to Tobin's q theory,if q is ________,new plant and equipment capital is ________ relative to the market value of business firms,so companies can buy a lot of new investment goods with only a ________ issue of stock.

According to the household liquidity effect,an expansionary monetary policy causes a ________ in the value of households' financial assets,causing consumer durable expenditure to ________.

The subprime financial crisis caused a recession because of the ________ in adverse selection and moral hazard problems and the ________ in housing prices.

As a result of recent empirical research,there has been a convergence of Keynesian and monetarist opinion to the view that

In a period of deflation,when there is a declining price level,________ nominal interest rates do not necessarily indicate that the cost of borrowing is ________ or that monetary policy is easy.

In a study published in 1963,Milton Friedman and Anna Schwartz found that in every business cycle they studied over nearly a hundred-year period,the growth rate of the ________ decreased before ________ decreased.