Monetaryaggregatesandthebusinesscycle$

A monetaryaggregateconsistingpredominantlyofzero-maturitydeposits,called MZM, tends tosystematicallyleadoutputintheUSbusinesscycle.Suchfluctuationsare observedbothbeforeandafterthe1979monetarypolicychange.Similardynamicsare obtainedinamodelwithmulti-stageproductionandpurchase-sizeheterogeneitywhen agentsoptimallychoosetheirmixofcash,checkable,andtimedepositsused in transactions.Thecausalityinthemodelrunsfromrealactivitytomoney,rather than theotherwayaround.Althoughthemonetarybaseisendogenous,througha Taylor-typerule,theleadin MZM is primarilydrivenbydepositcreation.