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Dewald, W., Lai, T. Factors Affecting Monetary Growth: ARIMA Forecasts of Monetary Base and Multiplier. Credit and Capital Markets – Kredit und Kapital, 20(3), 303-316. https://doi.org/10.3790/ccm.20.3.303
Dewald, William G. and Lai, Tsung-Hui "Factors Affecting Monetary Growth: ARIMA Forecasts of Monetary Base and Multiplier" Credit and Capital Markets – Kredit und Kapital 20.3, 1987, 303-316. https://doi.org/10.3790/ccm.20.3.303
Dewald, William G./Lai, Tsung-Hui (1987): Factors Affecting Monetary Growth: ARIMA Forecasts of Monetary Base and Multiplier, in: Credit and Capital Markets – Kredit und Kapital, vol. 20, iss. 3, 303-316, [online] https://doi.org/10.3790/ccm.20.3.303

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Factors Affecting Monetary Growth: ARIMA Forecasts of Monetary Base and Multiplier

Dewald, William G. | Lai, Tsung-Hui

Credit and Capital Markets – Kredit und Kapital, Vol. 20 (1987), Iss. 3 : pp. 303–316

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Article Details

Author Details

William G. Dewald, Washington, D.C.

Tsung-Hui Lai, Lynchburg, V.

References

  1. Axilrod, S. H., January 1985: U. S. Monetary Policy in Recent Years: An Overview, Federal Reserve Bulletin, Board of Governors of the Federal Reserve System: 14-24.  Google Scholar
  2. Bomhoff, E. J. 1977: Predicting the Money Multiplier, Journal of Monetary Economics, 3: 325 - 36.  Google Scholar
  3. Box, G. E. P. and Jenkins, G, 1976: Time Series Analysis, Forecasting and Control, Holden-Day, San Francisco, CA.  Google Scholar
  4. Dewald, W. G., and Gibson, W. E., May 1967: Sources of Variation in Member Bank Reserves, Review of Economics, and Statistics: 143 - 150.  Google Scholar

Abstract

Factors Affecting Monetary Growth: ARIMA Forecasts of Monetary Base and Multiplier

This paper uses the technique of autoregressive integrated moving averages to forecast the money multiplier and noncontrolled factors that affect the monetary base in the United States. These forecasts in turn are used to forecast the Ml money stock. Previous analysis along these lines has assumed that the monetary base was autonomous. The present analysis reveals that the Federal Reserve could have hit its Ml growth targets with less than one percent error on the assumption that the Federal Reserve forecasts both the monetary multiplier and noncontrolled sources of variation in the monetary base. In the present study, the M1 multiplier is forecast monthly and the noncontrolled sources of the monetary base weekly from which monthly average forecasts are derived. The conclusion is that observed failures to control monetary growth as targeted in the United States reflect unwillingness not inability to do so. Though control of only the M1 aggregate is examined in the present paper, this conclusion would be all the more applicable to broader aggregates, the added components of which are generally more stable and predictable than components of M1.