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The Empirical Reliability of Monetary Aggregates as Indicators: 1983-1987


  • Darby, Michael R
  • Mascaro, Angelo R
  • Marlow, Michael L


It is widely believed that monetary aggregates have failed to predict economic performance over 1983-87. This paper observes that the traditional definition of money (M1 less other checkable deposits, or M1A) shows no evidence of structural change, and yields lower prediction errors for both real GNP and inflation over 1983-87Q2 than the errors obtained using M1 or M2. If there is a mystery, it is not why M1A has done so well, but why economists abandoned it for M1 or what was once called M1B (currency, demand deposits, and other checkable deposits). Copyright 1989 by Oxford University Press.

Suggested Citation

  • Darby, Michael R & Mascaro, Angelo R & Marlow, Michael L, 1989. "The Empirical Reliability of Monetary Aggregates as Indicators: 1983-1987," Economic Inquiry, Western Economic Association International, vol. 27(4), pages 555-585, October.
  • Handle: RePEc:oup:ecinqu:v:27:y:1989:i:4:p:555-85

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    Cited by:

    1. Peter N. Ireland, 1991. "Financial evolution and the long-run behavior of velocity : new evidence from U.S. regional data," Economic Review, Federal Reserve Bank of Richmond, issue Nov, pages 16-26.
    2. Visser, H., 1989. "The demand for money," Serie Research Memoranda 0073, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    3. Joseph Haslag, 1993. "On quantity theory restriction and the signalling of the money multiplier," Working Papers 9308, Federal Reserve Bank of Dallas.

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