The paper seeks to explore the relationship between the changes in the level of economic activity and changes in the money market in Germany. The real side of the economy is represented by the GDP and sold industrial output, while the money side, with respect to both demand and supply, by the M1 and M2 aggregates. Additionally, selected interest rates observed in the German banking sector have been analyzed.

Relevant time series have been detrended, allowing for the isolation of the cyclic changes. After preliminary processing, the sets of data have been correlated with each and applied in the estimation of regressive relationships.

The results indicate a fairly strong relationship between the economic cycles observed in Germany and the monetary developments - with respect to both demand, supply, and interest rates. The link between the level of economic activity and M2 oscillations is particularly clear. However, given the nature of the relationships observed, it seems doubtful that existing theoretical concepts of the key economic schools can fully account for the emergence and profile of the German business cycles. Moreover, the creation of the euro zone in which the German economy now operates will most probably have a strong effect on the shape of the relationships observed.