Interest rates and the recent weakness in M2: an extension to the P* model of inflation

Article Abstract:

A combined Koenig demand-modified P* model yields results that differ from the ones obtained from the original P* model. Output-market slack's lack of explanatory power for its PCE deflator is consistent with the P* theory as long as money demand and consumption are linked closer to permanent income rather than transitory income. It has impartial inflation forecasts and its consumption-deflator forecasts have predictive power for the GDP deflator.

Inflation (Finance), Inflation (Economics)

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Macroeconomic price stickiness: evidence from the postwar United States

Article Abstract:

Price stickiness existed during the post-price control period of the US macroeconomy. Aside from determining price inflexibility, estimates ascertained price stickiness rather than rigidity. The rise in total output differs from sales growth due to factors indicating an inflexible price level. Variations of the traditional aggregate demand and aggregate supply systems show that the US price level reveals considerable inflexibility.

Research, Analysis, Prices, United States economic conditions

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Long-term interest rates and the recent weakness in M2

Article Abstract:

A model of the factors contributing to the weakness of the M2 monetary aggregate is developed. It is shown that the weakness of the M2 is the natural result of the increasing gap between long-term interest rates and M2 deposit rates. The effect of long-term interest rates on the demand for M2 also becomes more evident during periods that ended before the period of missing money. A rise in M2 velocity growth is also observed.

Interest rates, Money market, Money markets

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