This paper uses a simultaneous-equations model of the new consensus macroeconomic model to examine whether the inclusion of the money stock in the aggregate demand function improves the statistical fit of the model. The results indicate that the consensus model is accurate for the U.S. in that the inclusion of money does not increase the predictive power of the model. However, the results reveal that the estimated coefficients are more robust when money is included as an instrumental variable in the simultaneous equations consensus model.
Huston, Barry; McGibany, James M.; and Nourzad, Farrokh, "(WP 2010-09) Does Money Matter? An Empirical Investigation" (2010). Economics Working Papers. 9.