Working Paper

The real-time (in)significance of M2

Abstract: This paper examines the relationships between output, prices, interest rates, and M2 using data sets which were available in real time from 1973:1 to 1997:4. The purpose is threefold. First, the paper delineates a potential role for M2 in policymaking. Second, it provides a more accurate basis for interpreting historical policymaking. Third, it evaluates the cause and effect of the historical redefinitions of M2. The latter two objectives make it necessary to use data which was available to policymakers at the time decisions were made. In regard to the first objective, the approach is both novel and complementary to the existing literature.

Keywords: Money supply; Interest rates; Monetary policy;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Research Working Paper

Publication Date: 1998

Number: 98-05