Uncovering the Goodhart's Law: Theory and Evidence

Yosuke Takeda and Atsuko Ueda

No 162, 2006 Meeting Papers from Society for Economic Dynamics

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.

Keywords: Goodhart' Law; velocity of money; Taylor rule; Markov regime swiching; cash-credit model (search for similar items in EconPapers)
JEL-codes: E41 E52 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed006:162

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