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Working Paper
The Monetary Base in Allan Meltzer's Analytical Framework
This analysis of Allan Meltzer?s analytical framework focuses on the role that Meltzer assigned to the monetary base. For many years, Meltzer suggested that central banks should use the monetary base as their policy instrument, in place of a short-term nominal interest rate. However, he recognized that in practice central banks did not follow this prescription. He believed that the monetary base could play an important role even when an interest rate was used as the instrument. Meltzer?s reasoning was twofold: (i) The monetary base might shed light on the behavior of important asset prices ...
Working Paper
On the Stability of Money Demand
We show that regulatory changes that occurred in the banking sector in the early eighties, which considerably weakened Regulation Q, can explain the apparent instability of money demand during the same period. We evaluate the effects of the regulatory changes using a model that goes beyond aggregates as M1 and treats currency and different deposit types as alternative means of payments. We use the model to construct a new monetary aggregate that performs remarkably well for the entire period 1915-2012.