Money directly impacts economic output, challenging existing business cycle models.
The study tested if money causes changes in output levels. Results show that there is a significant relationship between money and output when measured in log levels, but not in first differences of the logs. This suggests that the lack of causality in the first difference results is likely due to a lack of statistical power, while the level results indicate that money does indeed cause changes in output. This finding is important for business cycle models that rely on the role of money in the economy.