Investigation of Monetary Effects on the Real Variable

We examined money-output regression (St. Louis equation) considering econometric problem, macroeconomic theory, and policy implications. Our results reveals that increases in money affects real variables like output over a few quarters. These results ascertain Keynesian macroeconomic view that price-wage rigidity cause output to respond to nominal shocks like shifts in money demand. Out derivation adds contribution to the previous empirical results with regard to endogeneity of money, lags from monetary shocks on output, serial correlation in output disturbances(persistence), and fundamental equilibrium relationship(cointegration), etc.