Comments on Gordon, Leeper, and Zha's trends in velocity and policy expectations
AbstractI argue that low-frequency movements in U.S. base velocity are well explained by standard models of money demand. The model of Gordon, Leeper, and Zha is not standard because they assume a very high interest elasticity. The positive conclusion that they reach about the model's ability to mimic movements in velocity necessarily implies that predicted movements in interest rates are too smooth.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 247.
Date of creation: 1998
Date of revision:
Publication status: Published in Carnegie-Rochester Series on Public Policy (No. 49, 1998, pp. 305-316)
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