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Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates

John Carlson (), Dennis Hoffman (), Benjamin Keen () and Robert Rasche ()

No 9917, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: There is strong evidence of a stable ?money demand? relationship for MZM and M2 through the 1990s. Though the M2 relationship breaks down somewhere around 1990, evidence has been accumulating that the disturbance is well characterized as a permanent upward shift in M2 velocity that began around 1990 and was largely over by 1994. This paper?s results support the hypothesis that households permanently reallocated a portion of their wealth from time deposits to mutual funds. This reallocation may have been induced by depository restructuring, but it could also be explained by appropriately measured opportunity cost.

Keywords: Demand; for; money (search for similar items in EconPapers)
Date: 1999, Revised 1999
New Economics Papers: this item is included in nep-ets and nep-mon
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