[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-322051-105":59,"doc-detail-322051-en":131},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":124,"head_meta":126,"extra_data":128,"updated_unix":130},105,"en","m2-growth-in-1995-a-return-to-normalcy","M2 Growth in 1995 - A Return to Normalcy?","","Economic Commentary examines how M2 money growth’s relationship with output and inflation changed after 1990. It explains why policymakers lost confidence in M2 as a monetary policy guide, citing Greenspan’s remarks that M2 reliability was downgraded and no replacement indicator was identified. The text then evaluates recent data showing M2 growth rebounding in 1995 and discusses evidence suggesting the linkage among M2, output, and inflation has stabilized again.",{"@graph":69,"@context":123},[70,84,106],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/m2-growth-in-1995-a-return-to-normalcy/322051/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/m2-growth-in-1995-a-return-to-normalcy/322051.png","ImageObject",300,407,{"name":92,"@type":93},"Seraphina","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-30","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":105},"InteractionCounter",{"@type":104},"ViewAction",11,{"@type":107,"mainEntity":108},"FAQPage",[109,115,119],{"name":110,"@type":111,"acceptedAnswer":112},"Why did policymakers reduce reliance on M2 after 1990?","Question",{"text":113,"@type":114},"The document states that the relationship between M2 and key variables like money, income, and inflation was permanently disturbed. It notes Greenspan’s 1993 view that M2 had been downgraded as a reliable indicator and no single replacement variable had emerged.","Answer",{"name":116,"@type":111,"acceptedAnswer":117},"What does the document cite as the original logic linking M2 to economic activity?",{"text":118,"@type":114},"It describes the quantity theory of money as implying that money-balance holders demand balances proportional to income in the long run. A steady supply matching that demand should support noninflationary growth.",{"name":120,"@type":111,"acceptedAnswer":121},"What explains M2’s unusual weakness and abnormal velocity behavior in the years after 1990?",{"text":122,"@type":114},"The text attributes the aggregate’s weakness to credit-market restructuring in the late 1980s and early 1990s and to the steepening of interest-rate maturity structures, which reduced short-term rates relative to long-term rates and distorted expected relationships.","https://schema.org",{"og:url":83,"og:type":125,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":127,"canonical":83},"index,follow",{"doc_id":129,"site_id":62},322051,1790099081,{"code":4,"msg":5,"data":132},{"doc_id":129,"user_id":133,"nickname":92,"user_avatar":134,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":135,"file_id":136,"file_url":137,"file_type":138,"file_size":139,"view_count":105,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":144,"read_time":145,"preview_page_count":4},962075114101,"https://ap-avatar.wpscdn.com/avatar/e000253a75eb197efd?x-image-process=image/resize,m_fixed,w_180,h_180&k=1780044092746381165","# M2Growth in 1995:A Return to Normalcy?\n\nby John B.Carlson and Benjamin D.Keen  \nIn years past,the growth rates ofmoney measures such as M2 receivedconsiderable attention because evidenceshowed that there was a simple and sta-ble long-run relationship between M2,nominal income,and inflation.Manyanalysts believed that abrupt changes inmoney growth induced swings in output,while changes in the trend rate of moneygrowth led to changes in the underlyingrate of inflation.Indeed,the view thatM2 is an important monetary policyguide is reflected in the fact that the Fed-eral Reserve is required by law to spec-ify growth ranges for the monetary andcredit aggregates.  \nIn recent years,however,the reliabilityof money measures as indicators ofmonetary policy has been called intoquestion.Since 1990,the relationshipbetween M2 and the variables men-tioned above seems to have been perma-nently disturbed.As a result,policymak-ers'focus on money measures hasdiminished significantly.In July 1993,Federal Reserve Chairman AlanGreenspan reported that“...at least forthe time being,M2 has been down-graded as a reliable indicator of financialconditions in the economy,and no singlevariable has yet been identified to takeits place.\"2  \nThe latest data,however,suggest that M2may have begun to regain its value as apolicy indicator.After decelerating forfive successive years,the growth rate of  \nthe aggregate has turned up substantiallyin 1995.Year to date,M2 has advancedat a 4.3 percent annual pace,approachingthe upper end of its Humphrey-Hawkinsspecified growth range(see figure 1).This recent strength raises a number ofquestions.Can we infer that the relation-ship of M2,output,and inflation hasstabilized again?Will M2 regain its loststatus?This Economic Commentary dis-cusses the breakdown and diminishedrole of M2,then looks at evidence sug-gesting tiat the relationship among thesevariables has indeed been restored.  \n# ■ The Demand for M2\n\nThe link between money and economicactivity has long been succinctly repre-sented in the quantity theory of money.In his influential restatement of this idea,Milton Friedman argues that \"the quan-tity theory is in the first instance a theoryof money demand.”3 Simply put,thenotion is that over the long run,money-balance holders tend to demand alevelof balances proportionate to theirincome.Providing a steady supply ofmoney equal to that demanded shouldthereby foster noninflationary economicgrowth.It was largely on the belief thatmoney demand is one of the most stableand reliable relationships in economicsthat money measures earned their statusin the monetary policy process.  \nFrom the mid-1980s to the early 1990s,the demand for M2 was perceived to bereasonably stable and the most reliable of  \nIn recent years,M2 growth has beenunusually weak.This aberrantbehavior led to its demise as the pri-mary indicator of monetary policy.Although the aggregate has beenbehaving more normally aver thepast year or so,it seems unlikely thatit will soon regain its earlier statureas a key policy guide.  \nthe alternative money measures.M2 andnominal GDP had grown at approxi-mately the same rate over the previous30 years,suggesting a simple and endur-ing relationship that provided policymak-ers with a reliable and uncomplicatedframework for setting monetary targets.This relationship is summarized by thetrendless long-run average of M2 veloc-ity,defined as the ratio of GDP to M2.  \nAlthough M2 velocity had been trend-less in the long run,it exhibited consid-erable variation in the short run.Mostofthis variation,however,was associatedwith changes in the opportunity cost ofholding M2 deposits,defined as the dif-ference between short-term market inter-est rates and the rate of return on M2deposits(see figure 2).Specifically,anincrease in the opportunity cost ofM2encourages balance holders to shedM2 deposits in favor of higher-yieldingalternatives.Hence,M2 deposits arepared down and velocity increases.  \nBefore the 1990s,Federal ReserveBoard est","cbCaifuSNHgvsSbf","https://ap.wps.com/l/cbCaifuSNHgvsSbf","pdf",1316829,"English","# M2 Growth in 1995: A Return to Normalcy?\n# The Demand for M2\n## Money demand and the quantity theory\n## M2 velocity and opportunity cost\n## Breakdown after 1990\n## Credit-market restructuring and lending standards\n## Interest-rate maturity structure changes","[{\"question\":\"Why did policymakers reduce reliance on M2 after 1990?\",\"answer\":\"The document states that the relationship between M2 and key variables like money, income, and inflation was permanently disturbed. It notes Greenspan’s 1993 view that M2 had been downgraded as a reliable indicator and no single replacement variable had emerged.\"},{\"question\":\"What does the document cite as the original logic linking M2 to economic activity?\",\"answer\":\"It describes the quantity theory of money as implying that money-balance holders demand balances proportional to income in the long run. A steady supply matching that demand should support noninflationary growth.\"},{\"question\":\"What explains M2’s unusual weakness and abnormal velocity behavior in the years after 1990?\",\"answer\":\"The text attributes the aggregate’s weakness to credit-market restructuring in the late 1980s and early 1990s and to the steepening of interest-rate maturity structures, which reduced short-term rates relative to long-term rates and distorted expected relationships.\"}]","M2 Growth in 1995 - A Return to Normalcy? | PDF",1789960915,13]