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A Minor Redefinition of M2

Author

Listed:
  • Sean Collins
  • William C. Whitesell

Abstract

This paper recommends redefining M2 by shifting overnight wholesale RPs and overnight Eurodollars from non-M1 M2 to non-M2 M3. The overnight components are quite volatile and difficult to measure accurately. Their movements no longer exhibit the negative correlation with demand deposits that had been observed in 1980, when these components were originally included in M2. The redefinition does not affect the quarterly and annual behavior of M2, nor its relationship to interest rates and income.

Suggested Citation

  • Sean Collins & William C. Whitesell, "undated". "A Minor Redefinition of M2," Finance and Economics Discussion Series 1996-07, Board of Governors of the Federal Reserve System (U.S.), revised 04 Dec 2019.
    • Handle: RePEc:fip:fedgfe:1996-07
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    File URL: http://www.federalreserve.gov/pubs/feds/1996/199607/199607pap.pdf
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    Citations

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    Cited by:

    1. Richard G. Anderson & Barry E. Jones & Travis D. Nesmith, 1997. "Special report: The monetary services index project of the Federal Reserve Bank of St. Louis: introduction to the St. Louis monetary services index project," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 25-30.
    2. Barnett, William A, 1997. "Which Road Leads to Stable Money Demand?," Economic Journal, Royal Economic Society, vol. 107(443), pages 1171-1185, July.
    3. William A. Barnett, 2000. "Which Road Leads to Stable Money Demand?," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 577-592, Emerald Group Publishing Limited.

    More about this item

    Keywords

    Definition of money; M2;

    JEL classification:

    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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