[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-324432-105":59,"doc-detail-324432-en":130},{"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":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","understanding-the-recent-behavior-of-m2","Understanding the Recent Behavior of M2","","Economic Commentary analyzing why M2 money growth weakened persistently since around 1989 despite a Federal Reserve target range. It links the unexpected shortfall to the restructuring of the thrift industry, focusing on contractions in thrift assets and deposits, shifts of funds into instruments not included in M2, and resulting changes in savings deposits, small time deposits, and money market deposit accounts. It also discusses deposit opportunity cost and how thrift problems traced back to earlier inflation and interest-rate risk.",{"@graph":69,"@context":122},[70,84,105],{"@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/understanding-the-recent-behavior-of-m2/324432/",{"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/understanding-the-recent-behavior-of-m2/324432.png","ImageObject",300,407,{"name":92,"@type":93},"Jiven","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-29","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":52},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"Why has M2 growth been weaker than predicted since about 1989?","Question",{"text":112,"@type":113},"M2 growth has been consistently weaker than expected because the restructuring of the thrift industry contributed to an unanticipated shortfall, affecting deposit flows and components of M2.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How does thrift restructuring affect M2 growth?",{"text":117,"@type":113},"Thrift restructuring reduced thrift assets and the deposit base, with some money flowing out of closed thrifts not immediately moving into other depositories, instead being channeled into instruments such as U.S. Treasury bills that are not included in M2.",{"name":119,"@type":110,"acceptedAnswer":120},"What is the role of deposit opportunity cost in understanding M2 behavior?",{"text":121,"@type":113},"Deposit opportunity cost is measured as the difference between the interest rate paid on M2 deposits and the interest rate depositors could earn on similar money market instruments, shaping deposit demand and thus M2 growth.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},324432,1790116671,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":52,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},1099513958607,"https://ap-avatar.wpscdn.com/avatar/100002390cf8733938c?x-image-process=image/resize,m_fixed,w_180,h_180&k=1778829742770036399","by John B.Carlson and Sharon E.Parrott  \ngates—particularly M2—is ofien an im-portant consideration in the FederalReserve's monetary policy decisions.The Federal Open Market Committee(FOMC),the monetary policymaking amof the Federal Reserve System,periodi-cally sets a target range for M2 growth,based on economic conditions and on itspolicy stance.In order to steer M2 growthwithin these bounds(currently 21/2 and6%percent),policymakers must be ableto predict with precision the demand for  \nM2.This entails understanding why indi-viduals and institutions hold transactionsand savings deposits.The detemminingfactors have traditionally been the levelof income and the opportunity cost ofholding M2 balances.Until recent years,these factors have accurately predictedM2 growth.  \nSince about 1989,M2 growth has beenconsistently weaker than predicted.Thisunanticipated weakness is worrisome,because i may impart unintended effectson the economy,such as a slowdown inaggregate spending.Chairman Green-span's February Humphrey-Hawkinstestimony acknowledged this concernby indicating that the policy easings inearly 1990 were partly designed to rein-vigorate M2 growth and thus to guardagainst this possibility.However,without understanding the underlyingreasons for the shortfall,it is conceiv-able that,if temporary,M2's weaknesscould tum around and that the recentpolicy easings could lead to a greater-than-intended economic stimulus.  \n# Understanding the RecentBehavior of M2\n\nTherefore,even though M2 growth iscurrently around the midpoint of its1991 target range,it is important to un-derstand why the aggregate has consis-tently deviated from its expected pathin recent years.  \nChairman Greenspan's testimony of-fered several explanations for the unan-ticipated shortfall in M2 growth.Oneof these explanations,the extraordinarydecline in assets at depository institu-tions,is related to the restructuring ofthe thrift industry.Thrifts'assets anddeposit base have contracted substan-tially since 1988(see figure 1).It hasbeen suggested that,as a result ofreduced confidence in the industry andlower interest rates that followedrestructuring,some of the money flow-ing out of closed thrifts has not immedi-ately flowed into other depositories,but has been channeled into instru-ments such as U.S.Treasury bills,which are not included in M2.  \nIn this Economic Commentary,we ex-amine how the the unexpected slowdownin M2 growth may be largely attributableto the restructuring of the thrift industry,and we explain why economic modelspredicting M2 growth have had problemstracking this weakness  \n■ Thrift Restructuring  \nand Deposit Growth  \nThe effects of thrift restructuring ondeposit growth seem evident in the be-havior of savings deposits,small timedeposits,and money market deposit  \nJune 15,1991  \nThe weakness in M2 is a complexdevelopment and requires careful inter-pretation.The shortfall from our expec-tations appeared to be related to thestalling of nominal income in the fourthquarter [of 1990],and also to the cir-cumstances surrounding the extraordi-nary decline in assets at depositoryinstitutions last year,which in turn hadimplications for future as well as cur-rent spending.….Our policyeasings overrecent months were keyed partly to rein-vigorating growth of M2 to a rate morelikely to be consistent with satisfactoryeconomic performance.  \n—Alan Greenspan,Chairman,Board of Governors of theFederal Reserve System,1991 Monetary Policy Objectives,Humphrey-Hawkins Testimony,February 20,1991  \naccounts(see figure 2).The slowgrowth of these deposits accounted formuch of the weakness in M2 fromApril 1990 to January 1991,and theirsubsequent rapid growth has to a largeextent driven M2's surge in early 1991.  \nWhen these M2 components are brokendown by issuing institution,it becomesapparent that the softness stems largelyfrom the substantial drop in these depositsat thrifts(see figure 3).Although bankshave acquired some of these funds,theadditional deposits only partially o","cbCairrmH70rmXwa","https://ap.wps.com/l/cbCairrmH70rmXwa","pdf",1159366,"English","# Understanding the RecentBehavior of M2\n## Thrift Restructuring and Deposit Growth","[{\"question\":\"Why has M2 growth been weaker than predicted since about 1989?\",\"answer\":\"M2 growth has been consistently weaker than expected because the restructuring of the thrift industry contributed to an unanticipated shortfall, affecting deposit flows and components of M2.\"},{\"question\":\"How does thrift restructuring affect M2 growth?\",\"answer\":\"Thrift restructuring reduced thrift assets and the deposit base, with some money flowing out of closed thrifts not immediately moving into other depositories, instead being channeled into instruments such as U.S. Treasury bills that are not included in M2.\"},{\"question\":\"What is the role of deposit opportunity cost in understanding M2 behavior?\",\"answer\":\"Deposit opportunity cost is measured as the difference between the interest rate paid on M2 deposits and the interest rate depositors could earn on similar money market instruments, shaping deposit demand and thus M2 growth.\"}]","Understanding the Recent Behavior of M2 | PDF",1789967918,13]