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Uncovering the Goodhart's Law: Theory and Evidence

Author

Listed:
  • Yosuke Takeda

    (Sophia University public)

  • Atsuko Ueda

Abstract

This paper addresses the Goodhart's Law in a cash-in-advance economy with monetary policy regime switching. Using the Japanese data of the money velocity, we found that although our cash-credit model fails to generate a downward trend in the actual velocity, the model succeeds in terms of velocity's variation and correlations with money growth rates or nominal interest rates, with procyclicality of velocity unpredictable.

Suggested Citation

  • Yosuke Takeda & Atsuko Ueda, 2006. "Uncovering the Goodhart's Law: Theory and Evidence," 2006 Meeting Papers 162, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:162
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    References listed on IDEAS

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    More about this item

    Keywords

    Goodhart' Law; velocity of money; Taylor rule; Markov regime swiching; cash-credit model;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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