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Key Developments in Monetary Economics: Screen Reader version

Money and Inflation: Some Critical Issues


Bennett T. McCallum
Carnegie Mellon University
bmccallum@cmu.edu


Edward Nelson
Federal Reserve Board
edward.nelson@frb.gov

Figure 1. Growth in M1 and M2 (four quarter growth rates)

  M1 4 qtr growth M2 4 qtr growth
1960 0.406698564593544 3.7753329473076
1960 -0.664136622391361 3.06937471474191
1960 -0.447479981158492 3.50106945851604
1960 0.380137799952238 4.64437962755217
1961 1.16750059566332 5.89219953130232
1961 2.12511938872996 6.98549761983861
1961 1.77430801987225 6.88492495105504
1961 2.74556213017775 7.2041166380789
1962 2.89684408855396 7.56665612814828
1962 2.82908580780898 7.85389072847683
1962 2.13854021385354 7.71344255622277
1962 1.7737848422018 7.97000000000011
1963 2.17441062027947 8.14147153913981
1963 2.43292405638951 8.20301256835845
1963 3.57305416476993 8.71043930089741
1963 4.02897238569467 8.64128924701307
1964 3.60663082437231 8.04493567675305
1964 3.37402885682599 7.55453094520305
1964 3.99912107229205 7.79525506213611
1964 4.32985204525721 7.91986359761279
1965 4.45405405405428 8.25926547040072
1965 4.3375563667595 8.21104699093159
1965 3.88759771814898 7.88455336988069
1965 4.37956204379563 8.02591041946449
1966 5.40260815566138 7.95445743939294
1966 5.92714550319 7.46609782111824
1966 4.35224730526786 6.03048871618594
1966 2.81718281718282 4.80438756855577
1967 2.06205813040063 4.49131869708695
1967 2.3703128035751 5.72096980008508
1967 4.95030208536369 7.95686799633534
1967 6.35445005829772 9.14038515210703
1968 6.69617086780836 9.24196649272186
1968 7.04118428544335 8.44229866559387
1968 6.77808727947967 7.62501632066842
1968 7.32687739813651 7.8378723948345
1969 7.84490532010822 7.83155248271521
1969 6.8794326241133 7.01830324016831
1969 5.30434782608715 5.64721581948316
1969 3.91556009533502 4.14394119041975
1970 3.16053511705687 2.77453951970163
1970 3.10218978102174 2.56543595077138
1970 3.9966969446735 4.22001492794397
1970 5.01310615989518 6.10804349063591
1971 5.64110876965473 9.11411070780405
1971 7.0796460176993 12.5626725254915
1971 7.51151341908865 13.3539003966505
1971 6.59906396255852 13.3744635193133
1972 6.90501764615622 13.1503716409376
1972 6.40120210368145 11.6810970421901
1972 6.77991137370755 12.0966174183515
1972 8.38577491584958 12.7667628826953
1973 8.42543418975184 12.0722127796408
1973 7.93673209998575 11.1270445888416
1973 6.9442523170562 9.02232820290488
1973 5.71158520118825 6.87759640804004
1974 5.34815991527642 6.32454810017621
1974 5.10270836059142 5.86740866198887
1974 4.824731600052 5.5197645748826
1974 4.76433771873828 5.77149587750294
1975 3.70696154812754 5.83654587509642
1975 4.29478401593428 8.40665828667191
1975 5.31836130306035 11.1668048541494
1975 4.7671299683003 12.134372680029
1976 5.64643160063033 13.5317257958761
1976 5.84865122941061 12.8074490512994
1976 4.9560632688928 11.7333966166041
1976 6.10962411264984 13.0524016021723
1977 7.08796880376192 13.2952613173352
1977 7.35227785295431 12.9543684784309
1977 7.94820272382215 12.564475999758
1977 8.12678218907656 10.8778402436165
1978 7.81835707400653 9.2345595106618
1978 8.37184873949561 8.35539377895434
1978 8.52119958634966 7.88970053101191
1978 8.12455624302668 7.67686904164579
1979 7.38055031290366 7.25359050137347
1979 7.68634292914627 7.78490354761491
1979 8.18562988374299 8.31709388897166
1979 7.26078799249532 7.91190464511675
1980 7.7058279370954 8.21328434690157
1980 4.20342034203404 7.28165655325482
1980 5.5227693120761 7.96909237688876
1980 7.4164771733425 8.6454545454546
1981 6.93979214978949 8.60397587670316
1981 10.330828366589 9.90382287563004
1981 6.91151919866445 8.57081820123885
1981 5.55284155674989 9.0578194293369
1982 6.60187936711911 9.64995269631034
1982 5.01056916934174 9.04339467729322
1982 5.89475327920059 9.09842194325335
1982 8.82443690219062 8.76395442513523
1983 9.40254652301666 12.1619086919006
1983 11.62305226273 12.6182212182988
1983 12.8880041288799 12.3363272373114
1983 10.4054437198754 11.8424069273229
1984 9.08339646029895 8.33807150740829
1984 7.66096713865879 7.9137042593435
1984 6.13284566651427 7.64537777349683
1984 5.46995377503852 8.06868712352976
1985 6.51515151515132 8.97443813287235
1985 7.19027234940147 8.57397585263797
1985 10.0676923076923 9.43354015033991
1985 11.9917214511808 8.63646312103306
1986 11.4331436699858 7.02144536672457
1986 13.0686422039589 7.93725904997843
1986 13.8544112713855 8.35320894607009
1986 15.5016849657572 9.15598893276372
1987 16.7331524918888 9.25418569254158
1987 14.2966830466829 7.34842819196921
1987 9.77705755254375 5.36967623456016
1987 6.33411764705873 4.2524393695168
1988 3.69070943636944 4.44595200310116
1988 3.81566572618582 5.56376346798352
1988 5.05032431223437 5.91732222368112
1988 4.21756063020008 5.64282932241211
1989 3.37478578019949 4.38892561791783
1989 0.414132263491644 3.11202139159106
1989 -0.434338272866645 4.10129835001354
1989 0.535054567072904 5.22076238995375
1990 1.81083953241233 6.14215397606705
1990 3.93951110538292 6.28889869785931
1990 4.60183046788133 5.39478385137551
1990 4.18585005279841 4.14520975568343
1991 4.32132270051355 3.93807116163645
1991 5.34430023972886 4.2733001796115
1991 6.23926731539787 3.54288649203914
1991 7.94616070704609 3.09425498292278
1992 10.9581365564717 2.71323684926128
1992 11.7667830658768 1.60700950863743
1992 12.5692733990148 1.36509290766784
1992 14.3393675354917 1.76720727848111
1993 11.9030442937524 0.628523802520077
1993 11.935687706241 1.00441944556057
1993 12.2358974358974 1.37313432835831
1993 10.5899356194974 1.25550254112947
1994 9.85688499226376 1.85625475025822
1994 7.55503982939225 1.71721287618604
1994 5.18139449876634 1.28309100388114
1994 2.52465248901093 0.661234752732556
1995 1.09441934158853 0.469717117410242
1995 0.274092433299902 1.1168974857883
1995 -0.582102519548223 2.86253538848694
1995 -1.53543078973318 3.88032949431786
1996 -2.35089246843709 5.03227895107674
1996 -2.3961150367853 5.30962599632119
1996 -3.57715051414314 4.44166434992105
1996 -4.33976697658027 4.62747113566704
1997 -3.93520582553188 4.5853844270992
1997 -4.85624906897038 4.50628784350258
1997 -3.07845684420351 5.15514227660321
1997 -1.32562359671547 5.56052631578948
1998 -0.0711611645682436 6.26533177306801
1998 1.1899170189441 6.98950074994661
1998 0.679508758804921 7.14436390944444
1998 2.12268561810455 8.27163263779822
1999 1.94439284166266 8.15299405349417
1999 2.24972922791338 7.75454618280845
1999 1.98142414860745 7.46731768782495
1999 1.84354302109056 6.15075253467177
2000 1.42440624430512 5.94473104655014
2000 0.556867017734683 6.12891234852429
2000 0.258044930175781 5.80014949216625
2000 -1.73524740012587 5.95269942952989
2001 -0.907321455307678 7.13106001281412
2001 1.15271173177663 8.10625271445978
2001 5.78046934140774 9.34359350866143
2001 7.35025009149661 10.2088167053365
2002 8.01704339417447 9.31974190461635
2002 6.1382367818138 7.46860541969617
2002 2.47896032518493 7.03123515364199
2002 3.23597931700694 6.83653250773988
2003 3.63407469576164 6.49496693250328
2003 6.43081408387561 7.72676844415492
2003 8.34636871508381 7.89621642095788
2003 7.38641054572505 5.48565268544868
2004 6.84051398337059 4.68272858553522
2004 5.52863088026157 4.81006565286265
2004 4.54522017118647 3.75955109182767
2004 5.41503293098562 5.32784633473617
2005 3.88852392743445 5.17608955240168
2005 2.39610632721827 3.70178520887948
2005 1.61524993218466 4.01135528618172
2005 0.308747021928085 4.03436565937935
2006 0.792859401221151 4.87884537621699
2006 0.955514929920293 5.1057453152278
2006 -0.499927195068921 4.89451133666411
2006 -0.479872034124229 5.20615532724636
2007 -0.875901841082929 5.2317046044339
2007 -0.304222903638607 5.80819958061408
2007 0.346341463415136 6.09164603330737
2007 0.508974015537339 5.88123153178911
2008 0.808179162609789 6.5372095317278
2008 0.779830955898137 6.49694623616083
2008 3.3590977589806 6.10587660365463
2008 11.2909478581118 8.30482535109831

Figure 2. Old and New Definitions of M1 (growth rates of annual averages)

  M1growth-old M1growth-new
1960 -0.110170111005531 -0.0712250712250672
1961 2.1082600233825 1.96008553100499
1962 2.20687230923858 2.4117441454037
1963 2.9050062941803 3.05460750853242
1964 3.99648909900936 3.82513661202186
1965 4.29033430629377 4.25837320574163
1966 4.64233358264772 4.60455866605475
1967 3.97879159554789 3.93389880081895
1968 7.12625125968047 6.97903475446743
1969 6.01885777867328 5.94502170195976
1970 3.86151797603195 3.8361266294227
1971 6.69009324009325 6.70731707317075
1972 7.07143645243996 7.12605042016807
1973 7.45480460304875 7.23773663842694
1974 5.47218002278772 5.00341363503364
1975 4.2370905437631 4.52349990711502
1976 5.04646342516625 5.63405314138449

Figure 3. Growth in M1 and Adjusted M1

  M1 4-qtr growth Adjusted M1 4-qtr growth
1981 6.93979214978949 6.43489883101636
1981 10.330828366589 10.2384073786627
1981 6.91151919866445 6.69397685023348
1981 5.55284155674989 5.36158799740019
1982 6.60187936711911 6.79953617731848
1982 5.01056916934174 4.71951734219805
1982 5.89475327920059 5.55165754382714
1982 8.82443690219062 8.67566347959702
1983 9.40254652301666 9.03593726495704
1983 11.62305226273 11.6074112707061
1983 12.8880041288799 12.76674929958
1983 10.4054437198754 9.94163853284521
1984 9.08339646029895 8.7099478276392
1984 7.66096713865879 7.17548811165773
1984 6.13284566651427 5.73321689965182
1984 5.46995377503852 5.29566723439253
1985 6.51515151515132 6.29368771787849
1985 7.19027234940147 7.08479082473171
1985 10.0676923076923 10.0222597673402
1985 11.9917214511808 12.0352307988936
1986 11.4331436699858 11.5191387829335
1986 13.0686422039589 13.4772190494877
1986 13.8544112713855 14.4125779615731
1986 15.5016849657572 16.056500094161
1987 16.7331524918888 17.5076556860846
1987 14.2966830466829 14.7470155511913
1987 9.77705755254375 9.97102209841455
1987 6.33411764705873 6.29997636189996
1988 3.69070943636944 3.32549179397576
1988 3.81566572618582 3.35386447805518
1988 5.05032431223437 4.60647048058073
1988 4.21756063020008 3.79910296419883
1989 3.37478578019949 2.83716253454376
1989 0.414132263491644 -0.26212151623399
1989 -0.434338272866645 -1.03948474371679
1989 0.535054567072904 -0.0648265611101167
1990 1.81083953241233 0.96601233577924
1990 3.93951110538292 2.87285537038502
1990 4.60183046788133 2.86798484559569
1990 4.18585005279841 2.0539670235463
1991 4.32132270051355 1.92983814987338
1991 5.34430023972886 3.53960607577083
1991 6.23926731539787 4.80889796414782
1991 7.94616070704609 6.87449268917427
1992 10.9581365564717 10.819168600596
1992 11.7667830658768 11.8934666454821
1992 12.5692733990148 12.4707144218858
1992 14.3393675354917 14.3753841010925
1993 11.9030442937524 11.3276692647095
1993 11.935687706241 10.6433124756982
1993 12.2358974358974 11.0984381168299
1993 10.5899356194974 9.53278294431554
1994 9.85688499226376 9.32890327035934
1994 7.55503982939225 6.95625858771077
1994 5.18139449876634 4.47930609437775
1994 2.52465248901093 1.41866999570807
1995 1.09441934158853 -0.858848683689576
1995 0.274092433299902 -0.748172257211513
1995 -0.582102519548223 -0.15803477240321
1995 -1.53543078973318 0.961452380753403
1996 -2.35089246843709 3.7955318059515
1996 -2.3961150367853 5.08324337305646
1996 -3.57715051414314 4.80482344620962
1996 -4.33976697658027 4.85386631310219
1997 -3.93520582553188 4.1271670766717
1997 -4.85624906897038 3.56895587361431
1997 -3.07845684420351 4.48276560577068
1997 -1.32562359671547 5.01968573465618
1998 -0.0711611645682436 5.58336114556857
1998 1.1899170189441 5.98265563772062
1998 0.679508758804921 5.46821124522461
1998 2.12268561810455 6.11383363428782
1999 1.94439284166266 5.64444422666682
1999 2.24972922791338 5.58995539163895
1999 1.98142414860745 5.36497218203274
1999 1.84354302109056 3.57601799032238
2000 1.42440624430512 3.56745821367549
2000 0.556867017734683 2.84406283329077
2000 0.258044930175781 2.66597639839619
2000 -1.73524740012587 2.46303538434473
2001 -0.907321455307678 2.32805441403171
2001 1.15271173177663 3.70329211293189
2001 5.78046934140774 6.62714864966708
2001 7.35025009149661 7.65081859935151
2002 8.01704339417447 8.49843214680787
2002 6.1382367818138 7.87941607149172
2002 2.47896032518493 5.93792309581313
2002 3.23597931700694 6.53459404231068
2003 3.63407469576164 5.9963673382489
2003 6.43081408387561 7.4641555620644
2003 8.34636871508381 9.04734230975809
2003 7.38641054572505 8.7754159922602
2004 6.84051398337059 9.90369924517735
2004 5.52863088026157 9.14484736324922
2004 4.54522017118647 7.68749629046236
2004 5.41503293098562 7.65493324739785
2005 3.88852392743445 5.56498428034163
2005 2.39610632721827 4.3411408788973
2005 1.61524993218466 3.87942670548302
2005 0.308747021928085 2.68997397975225
2006 0.792859401221151 2.9244962510312
2006 0.955514929920293 2.86233067662988
2006 -0.499927195068921 2.10061271642382
2006 -0.479872034124229 1.95428178073183

Figure 4. Quarterly values of M1 and M2 velocity

  M1 velocity M2 velocity
1959 3.55622009569379 1.72148233931674
1959 3.6183586337761 1.74064354176175
1959 3.59844559585493 1.72002701789936
1959 3.65787598004277 1.72717074265201
1960 3.76697641172266 1.76431201874791
1960 3.76934097421206 1.74759216207241
1960 3.75443577004968 1.72612573417447
1960 3.71857988165681 1.68428387650086
1961 3.73056994818654 1.66930129623775
1961 3.78068739770869 1.6732201986755
1961 3.83193863319386 1.6775211152946
1961 3.88804422944022 1.6878
1962 3.95582513160907 1.69324973057706
1962 3.97817189631653 1.6785954139883
1962 4.02822030040967 1.67217760982523
1962 4.02874603893166 1.64851347596554
1963 4.04905913978495 1.63752491393369
1963 4.07014428412876 1.62582018088314
1963 4.11272247857616 1.62657512818285
1963 4.13511749347261 1.62020460358056
1964 4.21362162162164 1.63407680697636
1964 4.24457805454155 1.62959604286892
1964 4.24994717937885 1.62165430506289
1964 4.22690302398332 1.6010743344656
1965 4.32022355619955 1.61652854155372
1965 4.37188721959253 1.61839097973488
1965 4.42464917632706 1.62576595426693
1965 4.48051948051949 1.63985374771481
1966 4.54124116260802 1.65906155832974
1966 4.5457548086264 1.65865589111017
1966 4.63710777626195 1.67686235816478
1966 4.70404197434901 1.68901758303098
1967 4.72080046180489 1.68456468003296
1967 4.6819130764851 1.65419432709716
1967 4.66295264623955 1.63924794359577
1967 4.67403617759913 1.63540467970848
1968 4.7599639314698 1.65895663104965
1968 4.80904255319149 1.67715805095227
1968 4.79634782608697 1.67287395365765
1968 4.78140960163432 1.66504624140384
1969 4.82056856187291 1.68028678013523
1969 4.85783012607831 1.69197434564049
1969 4.93625103220479 1.71608198886146
1969 4.9369266055046 1.71543234473729
1970 4.94618252553089 1.73054673321234
1970 4.98680611423971 1.74598614162581
1970 5.00476417341594 1.73617232260908
1970 4.92683307332295 1.69425965665236
1971 5.05493325149605 1.71230313425852
1971 5.04342599549212 1.67979580601572
1971 5.04771048744458 1.66081842923793
1971 5.05517342309382 1.63450527610846
1972 5.12458734031861 1.6400845238642
1972 5.19248693687329 1.64768093210843
1972 5.18453451376402 1.62492954693258
1972 5.21172022684307 1.61965507112583
1973 5.30222398729146 1.64171824404639
1973 5.38335732042393 1.6592063876119
1973 5.39658517656191 1.65915056072536
1973 5.48652446033978 1.68645465253239
1974 5.45300326715256 1.67289899768697
1974 5.54512635379063 1.69672037481431
1974 5.60352912142153 1.71142684857165
1974 5.67959034381858 1.72917594654788
1975 5.70483460559799 1.71494135645079
1975 5.74719503461448 1.69184820801125
1975 5.84323374340949 1.69074821168254
1975 5.98359129524032 1.70204243768415
1976 6.09668539970181 1.70544451217557
1976 6.10351826792963 1.68590562217724
1976 6.1543871399866 1.67276533770255
1976 6.20037288879141 1.65539353478566
1977 6.22844596765557 1.64684393849291
1977 6.31890756302522 1.65883520847121
1977 6.40951396070321 1.67066497749266
1977 6.42296378943098 1.67227401167244
1978 6.40439058309326 1.67141079483589
1978 6.61442279732479 1.73667735532142
1978 6.67581475128642 1.75026232948583
1978 6.79924953095686 1.77760337469957
1979 6.83617021276596 1.78620806342455
1979 6.82196219621963 1.78953084787383
1979 6.86963798115034 1.79889286126168
1979 6.97761063494841 1.81322727272728
1980 7.01906725070855 1.82539647085101
1980 7.06918890904381 1.80117525364792
1980 6.97462437395658 1.78500320444349
1980 7.12090864680021 1.82953309346499
1981 7.35218054774717 1.88272798321748
1981 7.24410866671887 1.85291467248734
1981 7.44144284821987 1.87536893471332
1981 7.39285714285713 1.83835884451605
1982 7.19859865893167 1.79215590651612
1982 7.2487139342429 1.7855214588728
1982 7.24264543242645 1.77166973271291
1982 7.04387581514036 1.75255277498545
1983 6.98505612561119 1.69621057560454
1983 6.97742452578145 1.70350922966538
1983 7.02847625889882 1.72772372603796
1983 7.10342835130969 1.74466239868807
1984 7.21098484848485 1.76312052358608
1984 7.27024008933558 1.77084183326534
1984 7.3403076923077 1.77902398281828
1984 7.36669101533966 1.76581308820311
1985 7.32076813655761 1.74956797642993
1985 7.25031832388006 1.74348304129379
1985 7.14240187856425 1.74109004674745
1985 7.04212414392868 1.74014827947457
1986 6.99281953087601 1.74008338296605
1986 6.79238329238328 1.71101426103102
1986 6.61652916912199 1.69478755251441
1986 6.4140705882353 1.67709268988938
1987 6.30304825260856 1.67580893309267
1987 6.29678892919521 1.6888400418003
1987 6.39387161708791 1.70625872915448
1987 6.4831386086033 1.72900020064442
1988 6.52361910620908 1.72191099203174
1988 6.54756050213537 1.72701826250213
1988 6.56974961676036 1.73884230457128
1988 6.68945602785681 1.75995441748224
1989 6.83566418703508 1.78674681392429
1989 7.02874081711561 1.8054292650629
1989 7.09892224788298 1.79703790314723
1989 7.07290390707497 1.77797007889065
1990 7.14972234979751 1.79257607637471
1990 7.1886418120195 1.80568735140522
1990 7.1763022323984 1.80295839753467
1990 7.11019216735587 1.78804098486007
1991 7.06019370847674 1.77665649454634
1991 7.01769529564092 1.78085328819635
1991 6.96624846059112 1.79576186271689
1991 6.8645309096372 1.80750593354431
1992 6.69892511903043 1.82106192087072
1992 6.62978305132345 1.85064037864163
1992 6.55353846153845 1.87610472229019
1992 6.39889633425306 1.89304906371773
1993 6.32848762248584 1.91311168709684
1993 6.23097911309041 1.92755690086733
1993 6.11194370830668 1.93717777906505
1993 6.07146251633602 1.96176546799873
1994 6.08793498034156 1.98495183247075
1994 6.16209359965013 2.01565182556942
1994 6.19617723718506 2.03946352483628
1994 6.29949591517468 2.07312561970864
1995 6.36282107096212 2.08747690959989
1995 6.41699380615895 2.08153563175023
1995 6.51271519706371 2.07186544342508
1995 6.65749676356363 2.07671763431781
1996 6.81069995541684 2.07734776578096
1996 6.97154774318489 2.09594783418724
1996 7.15328842028945 2.10092899035518
1996 7.40288499984626 2.11131578947368
1997 7.5526747315987 2.11597971655181
1997 7.77529356505401 2.12816798800086
1997 7.86412941836543 2.12885506231384
1997 7.95371236207226 2.12043477176975
1998 7.9886680289802 2.10467155547217
1998 8.0754448398577 2.09050708964191
1998 8.21721362229107 2.0902189321153
1998 8.26618441534658 2.07858442126592
1999 8.33560104476708 2.07000633541497
1999 8.4007626656982 2.06362352241469
1999 8.56566484517304 2.06763054916387
1999 8.63820541253337 2.08399430252988
2000 8.72241353496038 2.07364561828149
2000 8.98311563233615 2.09082057245331
2000 9.09992429977293 2.08152960651628
2000 9.26845187263627 2.07379555070286
2001 9.2153088359725 2.02644082213082
2001 9.19512630545381 2.00250767855059
2001 8.84971660846172 1.95833201365707
2001 8.84121256889601 1.92689164086687
2002 8.81133025597986 1.914516874149
2002 8.91615272482624 1.91771579480501
2002 8.96790502793299 1.90008108092113
2002 8.88920384181415 1.87205939457868
2003 8.81794622610949 1.86448398089009
2003 8.69838803139654 1.84837155154561
2003 8.70555326389607 1.85219051171363
2003 8.77719689398016 1.88177862268277
2004 8.79064126534948 1.89702346224939
2004 8.81946836390865 1.88694923128681
2004 8.84108899903831 1.89527021669143
2004 8.85756308649781 1.90058058559334
2005 9.03239535958367 1.92533204765312
2005 9.15305301645331 1.93366393227355
2005 9.27651312915597 1.94280079897942
2005 9.39065946050755 1.94280900735571
2006 9.54334869579907 1.95499369763476
2006 9.66834874568411 1.96187312599211
2006 9.84358536585371 1.9555433881995
2006 9.94435379782291 1.94616814412353
2007 10.0746835443038 1.94405535278948
2007 10.1696737787896 1.94438862212509
2007 10.3397258276214 1.94286901755171
2007 10.4220052335724 1.93615862441484
2008 10.4128513474355 1.9012592259464
2008 10.4518780188883 1.89106672347973
2008 10.2624635499953 1.87843165950707
2008 9.37078725071843 1.78886579942645
2009 9.05152050392632 1.71269806116491
2009 8.76999359543825 1.69818657513531

Figure 5. Responses to a monetary policy shock

Δm (money growth) π (inflation) R (nominal interest rate) Δx (nominal income growth)
0 0 0 0
-4 0 1 0
-0.511 -0.1262 0.7250 -1.6109
1.1142 -0.09150 0.52560 0.31670
0.80780 -0.0664 0.38110 0.2296
0.5857 -0.04810 0.27630 0.1665
0.42460 -0.0349 0.2003 0.1207
0.3079 -0.0253 0.1452 0.08750
0.2232 -0.0183 0.1053 0.06340
0.1618 -0.01330 0.0763 0.0460
0.1173 -0.00960 0.0553 0.03340
0.08510 -0.007 0.04010 0.02420
0.06170 -0.0051 0.0291 0.0175
0.04470 -0.0037 0.0211 0.01270
0.03240 -0.0027 0.01530 0.00920
0.0235 -0.0019 0.0111 0.0067
0.017 -0.0014 0.008 0.00480
0.0124 -0.001 0.00580 0.0035
0.0090 -0.00070 0.00420 0.0025
0.00650 -0.0005 0.00310 0.0018

Response dates depicted refer to date 1 expectation for periods 0 through 19 for a shock occurring in period 1.

Figure 6. Responses to an IS shock

Δm π R
0 0 0
0.9 0 0.025
5.1931 1.55540 0.66670
-1.64970 1.3965 1.09960
-0.8508 1.2678 1.3826
-0.28890 1.1617 1.5585
0.1022 1.0727 1.65820
0.37010 0.9967 1.70410
0.54950 0.93060 1.71230
0.66560 0.87220 1.69440
0.7364 0.8201 1.6588
0.775 0.7729 1.61140
0.7909 0.7297 1.5566
0.791 0.6900 1.4975
0.7802 0.6531 1.43620
0.7621 0.6188 1.3742
0.73910 0.5866 1.3126
0.71310 0.5564 1.2522
0.6854 0.5279 1.1933
0.6568 0.501 1.1364

Figure 7. Responses to a natural output shock

Δm π R Δx
0 0 0 0
0 0 0 0
0.261 -0.18130 -0.0482 0.0683
0.0229 -0.16620 -0.08070 -0.1072
-0.03190 -0.1535 -0.1019 -0.1171
-0.06920 -0.1426 -0.1152 -0.1223
-0.094 -0.1331 -0.1227 -0.1242
-0.1097 -0.12480 -0.1263 -0.12380
-0.1191 -0.1174 -0.1269 -0.1218
-0.1239 -0.1106 -0.1257 -0.1188
-0.1255 -0.1044 -0.1231 -0.115
-0.12480 -0.09870 -0.1196 -0.1109
-0.1227 -0.0935 -0.1155 -0.1065
-0.1195 -0.08860 -0.1111 -0.1020
-0.1157 -0.084 -0.1066 -0.0975
-0.1115 -0.0796 -0.1020 -0.0931
-0.107 -0.0756 -0.0974 -0.0888
-0.10250 -0.0717 -0.0930 -0.08460
-0.098 -0.06810 -0.08860 -0.0805
-0.0935 -0.0646 -0.0844 -0.0766

Figure 8 (annual data)

  CPI inflation M1 growth, lagged_2_years
1960 1.45797598627788 #N/A
1961 1.07072414764733 #N/A
1962 1.19877334820173 -0.0712250712250672
1963 1.23966942148761 1.96008553100499
1964 1.27891156462594 2.4117441454037
1965 1.58516926383643 3.05460750853242
1966 3.01507537688444 3.82513661202186
1967 2.77278562259307 4.25837320574163
1968 4.27179615288533 4.60455866605475
1969 5.46238620028749 3.93389880081895
1970 5.83825533848259 6.97903475446743
1971 4.29276668813059 5.94502170195976
1972 3.27227824655281 3.8361266294227
1973 6.17776006377033 6.70731707317075
1974 11.0548048048047 7.12605042016807
1975 9.14314686496551 7.23773663842694
1976 5.74481263549074 5.00341363503364
1977 6.50168399472835 4.52349990711502
1978 7.63096383885604 5.63405314138449
1979 11.2544711292796 7.63018423487846
1980 13.5492019749684 8.22260434578707
1981 10.3347153402771 7.61952910587895
1982 6.13142700027496 6.21434803033353
1983 3.21243523316062 7.39874897327352
1984 4.30053547523424 6.59489351688435
1985 3.54564415209375 11.0822893095646
1986 1.89804772234277 7.05023103294082
1987 3.66456321751685 8.96686159844056
1988 4.07774110744406 13.5105204872647
1989 4.82700303008954 11.6060037523452
1990 5.39795643990315 4.19594526443199
1991 4.23496396453862 0.955116001419749
1992 3.02881967814965 3.63409722888103
1993 2.95165696638553 5.97396989884034
1994 2.60744159215462 12.4356101394022
1995 2.80541968853663 11.6529481803593
1996 2.93120419993433 6.19668026706232
1997 2.33768993730736 -0.19428496583642
1998 1.55227909874374 -3.16054243219598
1999 2.18802719697353 -3.3156408808583
2000 3.37685727149932 0.978811876562279
2001 2.82617111885402 2.00111044278904
2002 1.58603162650608 0.12020593771972
2003 2.2700949733611 3.32548024646612
2004 2.67723669309179 4.90879593089539
2005 3.39274684549544 6.45336565589014
2006 3.22594410070407 5.56940654508335
2007 2.85267248150138 2.03436477238916
2008 3.83910029665098 0.191361399671952

Figure 9 data (annual data)

  M1 growth, per_unit_of_output CPI inflation
1960 -2.48569686645915 1.45797598627788
1961 -0.362868538878802 1.07072414764733
1962 -3.43816507784794 1.19877334820173
1963 -1.26142884921724 1.23966942148761
1964 -1.85535902668678 1.27891156462594
1965 -2.03161147174943 1.58516926383643
1966 -1.79363970553034 3.01507537688444
1967 1.37147014807586 2.77278562259307
1968 2.03823596058641 4.27179615288533
1969 2.75309791704923 5.46238620028749
1970 3.63914950450217 5.83825533848259
1971 3.24010902742431 4.29276668813059
1972 1.72330363821414 3.27227824655281
1973 1.36441500394893 6.17776006377033
1974 5.58534629408791 11.0548048048047
1975 4.74627773251393 9.14314686496551
1976 0.255064342361977 5.74481263549074
1977 2.89883522821666 6.50168399472835
1978 2.50611162997376 7.63096383885604
1979 4.35877684910988 11.2544711292796
1980 6.50539608111027 13.5492019749684
1981 4.74032857678783 10.3347153402771
1982 8.70649243970942 6.13142700027496
1983 6.27962131409054 3.21243523316062
1984 -0.125947961209139 4.30053547523424
1985 4.63637823122123 3.54564415209375
1986 9.71108558151723 1.89804772234277
1987 8.14487927351459 3.66456321751685
1988 0.0822451703293314 4.07774110744406
1989 -2.52702193494594 4.82700303008954
1990 1.72495641434831 5.39795643990315
1991 6.22253955288061 4.23496396453862
1992 8.74523763781332 3.02881967814965
1993 8.55751775881168 2.95165696638553
1994 2.03893543782101 2.60744159215462
1995 -2.64176777840099 2.80541968853663
1996 -6.65271252776268 2.93120419993433
1997 -7.44034832569834 2.33768993730736
1998 -3.23571684006344 1.55227909874374
1999 -2.69500183320459 2.18802719697353
2000 -3.85927347519766 3.37685727149932
2001 2.22185572183697 2.82617111885402
2002 3.03999733290543 1.58603162650608
2003 3.86680968376014 2.2700949733611
2004 1.92727148831264 2.67723669309179
2005 -0.989916231831078 3.39274684549544
2006 -2.41684761998012 3.22594410070407
2007 -2.18041055493416 2.85267248150138
2008 3.61113735336778 3.83910029665098

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