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Uncovering the Goodhart's Law: Theory and Evidence

  • Yosuke Takeda

    ()

    (Sophia University public)

  • Atsuko Ueda

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.

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File URL: http://repec.org/sed2006/up.25204.1138887132.pdf
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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 162.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:162
Contact details of provider: Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Fax: 1-314-444-8731
Web page: http://www.EconomicDynamics.org/society.htmEmail:


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  1. Robert E. Lucas, Jr. & Nancy L. Stokey, 1985. "Money and Interest in a Cash-in-Advance Economy," NBER Working Papers 1618, National Bureau of Economic Research, Inc.
  2. Thomas F. Cargill & Michael M. Hutchison & Takatoshi Ito, 1997. "The Political Economy of Japanese Monetary Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032473, June.
  3. William T. Gavin & Finn E. Kydland, 1997. "Endogenous money supply and the business cycle," Working Papers 1995-010, Federal Reserve Bank of St. Louis.
  4. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
  5. Miyao, Ryuzo, 1996. "Does a Cointegrating M2 Demand Relation Really Exist in the United States?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(3), pages 365-80, August.
  6. Carlson, John B. & Hoffman, Dennis L. & Keen, Benjamin D. & Rasche, Robert H., 2000. "Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 345-383, October.
  7. Miyao, Ryuzo, 1996. "Does a Cointegrating M2 Demand Relation Really Exist in Japan?," Journal of the Japanese and International Economies, Elsevier, vol. 10(2), pages 169-180, June.
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