IDEAS home Printed from https://ideas.repec.org/p/fip/fedcwp/8405.html
   My bibliography  Save this paper

Velocity: a multivariate time-series approach

Author

Listed:
  • Michael L. Bagshaw
  • William T. Gavin

Abstract

The Federal Reserve announces targets for the monetary aggregates that are implicitly conditioned on an assumption about future velocity for each of the monetary aggregates. In this paper we present explicit models of velocity for constructing rigorous tests to determine whether the behavior of velocity has changed from what was expected when the targets were chosen. We use time-series methods to develop alternative forecasts of velocity. Multivariate time-series models of velocity that include information about past interest rates produce significantly better out-of-sample forecasts than do univariate methods. Using this multivariate time-series framework, we analyze the Federal Reserve's decisions to change, miss, and switch targets from 1980:IQ to l984:IIQ. For this period, we find that when the Federal Reserve deviated from its announced target, velocity deviated significantly from its predicted value.

Suggested Citation

  • Michael L. Bagshaw & William T. Gavin, 1984. "Velocity: a multivariate time-series approach," Working Paper 8405, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:8405
    as

    Download full text from publisher

    File URL: https://fraser.stlouisfed.org/scribd/?item_id=494451&filepath=/docs/historical/frbclev/wp/frbclv_wp1984-05.pdf#scribd-open
    File Function: Full text
    Download Restriction: no

    More about this item

    Keywords

    Money supply ; Time-series analysis;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedcwp:8405. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (4D Library). General contact details of provider: http://edirc.repec.org/data/frbclus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.