X hits on this document





18 / 19


the 1980s and attempts to assess the credibility of each. Alone, none of these explanations can account for the behavior of Ml velocity. Perhaps, instead, ~sev- eral influences have combined to produce the anomalous velocity behavior that has puzzled many researchers.

If there are several influences at work, financial innovations and cyclical variations in measured in-

come seem to be among the best candidates. This combination works well in explaining the velocity

puzzle through the first quarter- of 1986. when com-

bined with cyclical variation in velocity induced by rapid money growth, it may explain the behavior of

velocity through last year. Another explanation that deserves further scrutiny is the possible increased interest sensitivity of Ml balances as a result of mone- tary innovations during the 1980s.


B a r n e t t , W i l l i a m A . E c o n o m i c M o n e t a r y A g g r e g a t i o n : A n A p p l i c a - t i o n o f i n d e x N u m b e r a n d A g g r e g a t i o n T h e o r y , J o u r n a l o f E c o n o - m e t r i c s ( S e p t e m b e r 1 9 8 0 ) , p p . 1 1 - 4 8 . Batten, Dallas S., and Daniel L. Thornton “Are Weighted Monetary .

Aggregates Better Than Simple-Sum Ml?” this Review (June/July 1985), pp. 29—40.

Darby, Michael R.

“The Allocation of Transitory Income Among

Consumers’ Assets,” American Economic Review (December 1972), pp. 92&—41.

Darby, Michael R., Angelo R. Mascaro, and Michael L. Marlow, “The Empirical Reliability of Monetary Aggregates as Indicators:

1983—1986,” U.S. Department of Treasury Research Paper No, 8701 (1987).

Darby, Michael Fl., William Poole, David E. Lindsey, Milton Friedman, and Michael J. Bazdarich, “Recent Behavior of the Velocity of Money,” Contemporary Policy Issues (January 1987), pp. 1—33.

Farr, Helen T., and Deborah Johnson.

“Revisions in the Monetary

Services (Divisia) Indexes of Monetary Aggregates,” mimeo, Board of Governors of the Federal Reserve System (1985).

Friedman, Milton. “Why a Surge in Inflation is Likely Next Year,”

________ Wall Street Journal (September 1, 1983). “The Quantity Theory of Money

A Restatement,” in

S t u d i e s i n t h e Q u a n t i t y T h e o r y o f M o n e y ( T h e U n i v e r s i t y o f C h i c a g o P r e s s , 1 9 5 6 ) , p p . 3 2 1 . Friedman, Milton, and Anna J. Schwartz. Monetary Trends in the

United States and the United Kingdom Chicago Press. 1982).

, 1867—I 975 (University of

Gilbert, R. Alton, and A. Steven Holland.

“Has the Deregulation of

Deposit Interest Rates Raised Mortgage Rates?” this Review (May 1984), pp. 5—15.

Haraf, William S. “The Recent Behavior of Velocity: Implications for Alternative Policy Rules,” manuscript (1986).

Hetzel, Robert L.

“Will Recent High Growth Rates of Money Revive

Inflation?” Contemporary Policy Issues (January

1987), pp. 41—53.

Hetzel, Robert L., and Yash Mehra. Exchange Rate,” manuscript, July

“U.S. 1985.





Holland, A. Steven,

“Real Interest Rates: What Accounts for Their

Recent Rise?” this Review (December 1984), pp.




Judd, John P. “The Recent Decline in Velocity: Instability in the Demand for Money or Inflation?” Federal Reserve Bank of San Francisco Economic Review (Summer1983), pp. 12—19.

Kopcke, serve

Richard W.

“How Erratic is Money Growth?” Federal Re’

Bank of

Boston New England Economic Review


1986), pp. 3—20. Kretzmer, Peter E., and Richard D. Porter.

“Total Transaction Mea-

sures and Ml Growth,” Contemporary Policy Issues (January

1987). pp. 64—75. Mascaro, Angelo, and Allan H. Meltzer.

“Long- and Short-Term

Interest Rates in a Risky World,” Journal of Monetary Economics (November1983), pp. 485—518.

McCalfum, Bennett T. “On ‘Real’ and ‘Sticky-Price’ Theories of the Business Cycle,” Journal ofMoney, Creditand Banking (November

1986), pp. 397—414.

McGibany, James M., and Farrokh Nourzad. “Interest Rate Volatil- ity and the Demand for Money,” The Quarterly Review of Eco-

nomics and Business (Autumn 1986), pp. 73—83.

“Income Taxes and the Income Velocity of Money: An Empirical Analysis,” Journal of Macroeconomics (FaIl 1985). pp. 523—35.

Milbourne, Ross.

“Financial Innovations and the Demand for Liquid

Assets,” Journal ofMoney, Credit

and Banking (November 1986),

pp. 506—11. Morgan Guarantee.

“Demystifying Money’s Explosive Growth,”

Morgan Economic Quarterly (March 1986), pp. 10—13.

Nelson, Charles, and Charles Plosser.

“Trends and Random Walks

in Macroeconomic Time Series: Some tions,” Journal of Monetary Economics 139—62.

Evidence and Implica- (September 1982), pp.





and Velocity,”

this Review

(May 1982),

pp. 21—34. Radecki, Lawrence J., and John Wenninger


“Recent Instability in

Ml’s Velocity,” Federal Reserve Bank of New York Quarterly Review (Autumn 1985), pp.16—22.

Rasche, Robert H. “Ml -Velocity and Money Demand Functions: Do Stable Relationships Exist?”, Journal of Monetary Economics (forthcoming).

“Velocity and the Choice of Policy Regimes,” The Cato Journal (FaIl 1986), pp. 663—66.


Vance V.


Demand for


by Households: An


tion of Its Stability,” Federal Reserve Bank of Kansas City Eco- nomic Review (April1985), pp. 17—27.

Santoni, G. J.

“Changes in Wealth and the Velocity of Money,” this

Review (March 1987), pp. 16—26.

Spindt, Paul A. “Money is What Money Does: Monetary Aggrega- tion and the Equation of Exchange,” Journal of Political Economy (February 1985), pp. 175—204.

Tatom, John A. “Was the 1982 Velocity Decline Unusual?” this

Review (August/September I 983a), pp. 5—15. “Alternative Explanations of the 1982—83 Decline in ________

V e l o c i t y , i n M o n e t a r y T a r g e t i n g a n d V e l o c i t y , C o n f e r e n c e P r o - c e e d i n g s , F e d e r a l R e s e r v e B a n k o f S a n F r a n c i s c o , I 9 8 3 b , p p . 2 2

56. Thornton, Daniel L.

“Why Does Velocity Matfer?” this Review (De-

cember 1963), pp. S—i 3. Thornton, Daniel L., and Dallas S. Batten.

“Lag Length Selection

and Tests of Granger Causality Between Money and Income,” Journal of Money, Credit and Banking (May 1985), pp. 164-78.










Recent Mi Behavior,” Contemporary Policy Issues (January 1987), pp. 54—63.

Document info
Document views29
Page views29
Page last viewedFri Oct 28 20:07:52 UTC 2016