Velocity: a multivariate time-series approach

Michael L. Bagshaw and William Gavin ()

No 8405, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

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.

Keywords: Money supply; time series analysis (search for similar items in EconPapers)
Date: 1984
References: Add references at CitEc
Citations:

Downloads: (external link)
https://fraser.stlouisfed.org/scribd/?item_id=4944 ... 4-05.pdf#scribd-open Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:8405

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().