The Recent Behavior of M2 Velocity?

By Stauffer, Robert F. | Atlantic Economic Journal, September 1993 | Go to article overview

The Recent Behavior of M2 Velocity?


Stauffer, Robert F., Atlantic Economic Journal


There have been numerous references in recent Federal Reserve Open Market Committee minutes concerning the unusual behavior of M2 velocity. Normally, when interest rates decline (along with the opportunity cost of holding M2 balances), V2 also declines. However, in the recent upturn, M2 opportunity costs (as measured by the Cleveland FR Bank) declined significantly, while V2 rose consistently through the period.

A fresh perspective on V2 movements can be gained if one ignores the usual demand for money approach and concentrates instead on the actual turnover rate for GDP transactions. In the case of M2, virtually all this turnover resides in its M1 components. Money market deposit accounts and money market mutual funds are the only M2 components that can be used directly in GDP transactions, and their turnover rate for all types of transactions is very low. With this in mind, it is useful to express V2 as a weighted average of its M1 and non-M1 components:

|Mathematical Expression Omitted~.

This is obviously an identity since both terms in the numerator are equal to V2. Nevertheless, it is useful to consider V2 in terms of GDP/M1 |center dot~ M1/M2. Although V1 has plunged about 10 percent during the current upturn (1991:2-92:4), the effect of this on V2 was more than offset by a rise in M1/M2 of about 16.5 percent, thereby allowing V2 to increase by about 4. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Recent Behavior of M2 Velocity?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.