Many (most… all…) claims about money policy contain some predicate, explicit or not, that the money authority actually can have real effects (e.g. Hamilton, “If you think that the Federal Reserve is responsible for more than 15-20% of the variation in the CPI, …”). This seems to be a pretty important assumption. Why don’t I know if its been tested or not?
I guess one way its tested is to produce models that don’t have money policy but explain big chunks of the data. Is this what RBC was all about? Does a current strand of the literature continue this line of research?
The Great Depression was a test of this assumption, but I want more than narrative evidence (i.e. more than one data point).