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M2 and monetary policy

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  • Robert L. Hetzel
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    Abstract

    Consistent with its mandate in the Humphrey-Hawkins Act of 1978, the Federal Reserve System each year sets a calendar-year target for the monetary aggregate M2. This paper examines the effect of specifying the M2 target as a multiyear trend line and concludes that an operationally significant target for M2 in the form of a trend line that rises at three percent per year will eliminate inflation.

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    File URL: http://www.richmondfed.org/publications/research/economic_review/1989/pdf/er750502.pdf
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    Bibliographic Info

    Article provided by Federal Reserve Bank of Richmond in its journal Economic Review.

    Volume (Year): (1989)
    Issue (Month): Sep ()
    Pages: 14-29

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    Handle: RePEc:fip:fedrer:y:1989:i:sep:p:14-29:n:v.75no.5

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    Related research

    Keywords: Money supply ; Monetary policy;

    References

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    1. Hetzel, Robert L & Mehra, Yash P, 1989. "The Behavior of Money Demand in the 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(4), pages 455-63, November.
    2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    3. Balke, Nathan S & Gordon, Robert J, 1989. "The Estimation of Prewar Gross National Product: Methodology and New Evidence," Journal of Political Economy, University of Chicago Press, vol. 97(1), pages 38-92, February.
    4. Brunner, Karl & Meltzer, Allan H, 1971. "The Uses of Money: Money in the Theory of an Exchange Economy," American Economic Review, American Economic Association, vol. 61(5), pages 784-805, December.
    5. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
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    Cited by:
    1. Ball, Laurence, 2012. "Short-run money demand," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 622-633.
    2. Darrat, Ali F. & Al-Mutawa, Ahmed, 1996. "Modelling money demand in the United Arab Emirates," The Quarterly Review of Economics and Finance, Elsevier, vol. 36(1), pages 65-87.

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