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Some further results on the source of shift in M1 demand in the 1980s

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  • Yash P. Mehra

Abstract

What caused the observed shift of M1 demand in the 1980s? Rival candidate explanations stress (1) M1 growth volatility, (2) disinflation, (3) rising real value of stocks, (4) rising volume of financial transactions, (5) rising household financial wealth, and (6) introduction into M1 of interest-bearing checkable deposits. The evidence presented here supports item six only.

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  • Yash P. Mehra, 1989. "Some further results on the source of shift in M1 demand in the 1980s," Economic Review, Federal Reserve Bank of Richmond, vol. 75(Sep), pages 3-13.
    • Handle: RePEc:fip:fedrer:y:1989:i:sep:p:3-13:n:v.75no.5
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    References listed on IDEAS

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    1. Friedman, Milton, 1988. "Money and the Stock Market," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 221-245, April.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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    5. Michael C. Keeley & Gary C. Zimmerman, 1986. "Deposit rate deregulation and the demand for transactions media," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 47-62.
    6. Hall, Thomas E & Noble, Nicholas R, 1987. "Velocity and the Variability of Money Growth: Evidence from Granger-Causality Tests: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(1), pages 112-116, February.
    7. Bharat Trehan & Carl E. Walsh, 1987. "Portfolio Substitution And Recent M1 Behavior," Contemporary Economic Policy, Western Economic Association International, vol. 5(1), pages 54-63, January.
    8. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
    9. John P. Judd & Bharat Trehan, 1987. "Portfolio substitution and the reliability of M1, M2 and M3 as monetary policy indicators," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 5-29.
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    Cited by:

    1. Darrat, Ali F. & Al-Sowaidi, Saif S., 2009. "Financial progress and the stability of long-run money demand: Implications for the conduct of monetary policy in emerging economies," Review of Financial Economics, Elsevier, vol. 18(3), pages 124-131, August.
    2. Bennett T. McCallum, 1993. "Unit roots in macroeconomic time series: some critical issues," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 13-44.

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