FW: Estimating money multiplier - Fed practices

["Niggle, Christopher" <Christopher_Niggle@xxxxxxxxxxxx>]

-----Original Message-----
From: Niggle, Christopher
To: 'Clifford Poirot '; Niggle, Christopher
Cc: Niggle, Christopher
Sent: 7/15/2003 9:53 AM
Subject: RE: Estimating money multiplier

 Cliff: two Fed publications describe the evolution of Fed policy in the
1970s and 1980s, including the brief experiment in targetting monetary
aggregates M1 and M2.  Apparently they estimated both M1 and M2 money
multipliers and money/GNP velocity with time series analysis.  For the
multipliers they used equations with the usual variables one would find
in a textbook discussion of complex multipliers (reserve ratios,
composition of deposits, interest rates, excess reserves, etc.) and
estimated those parameters with regressions.

"Intermediate targets and indicators for monetary policy: a critical
survey," FRB of New York (no date of publication on my copy, but the
introduction by President Corrigan is dated July 1990).  See articles by
Meulendyke and Wenninger.

"U.S. monetary policy and financial markets," Ann-Marie Meulendyke, FRB
of NY, 1998.

-----Original Message-----
From: Clifford Poirot
To: Niggle, Christopher
Sent: 7/14/2003 5:49 AM
Subject: RE: Estimating money multiplier

Hi Chris. Yes I did-thanks. I'll make sure to check out these articles.

I am still trying to figure out how the FED does its actual calculation
of
the money multiplier-whether they just divide monetary aggregates by the
base or whether they actually so some form of time series estimates.
It's
not a real important question. It's more curiousity driven than anything
else.

Best regards.

-----Original Message-----
From: Niggle, Christopher [mailto:Christopher_Niggle@xxxxxxxxxxxx]
Sent: Friday, July 11, 2003 2:28 PM
To: 'cpoirot@xxxxxxxxxxx'
Subject: FW: Estimating money multiplier


Cliff: did you receive this?  Chris

-----Original Message-----
From: Niggle, Christopher
To: 'Clifford Poirot '; ''pkt@xxxxxxxxxxxxxxxx' '
Cc: Niggle, Christopher
Sent: 7/3/2003 11:46 AM
Subject: RE: Estimating money multiplier

 Clifford: the summer 2002 JPKE has a set of articles about the
endogeneous ms theory and the "new consensus" among central bankers and
(at least among New Keynesians) macroeconomists that should abandon
targetting monetary aggregates since (1) they can't attain the targets
and (2) the relationship between the aggregates - even the broad ones
like M2 and M3 - and nominal GDP (the income velocity of money) is
unstable and difficult to estimate.

Point 1 implies that they understand that the money multiplier is
unstable and difficult to estimate.  Many central bankers and the New
Keynesian economists essentially agree with the post keynesian argument
that the money supply is endogeneous in the sense that M is determined
by the demand for money and credit, which move with nominal GDP.

The "new consensus" also includes the necessity to target interest rates
rather than the aggregates.  All three of these arguments were made by
institutionalist and post Keynesian monetary economists for about 35
years of course.

Chris
-----Original Message-----
From: Clifford Poirot
To: 'pkt@xxxxxxxxxxxxxxxx'
Sent: 7/2/2003 10:34 AM
Subject: Estimating money multiplier

I am curious if anyone knows (or knows where to find) the type of model
central banks use to estimate money multipliers. I would also be
interested
if anyone has done any recent work on the usefulness of the money
multiplier
model, particularly from a Post-Keynesian perspective.

In the interim, a few questions:

1. From a Post-Keynesian perspective, does the high powered money
(multiplier)=Ms model have any utility whatsoever (I suspect I would get
different answers from the hard core endogenous money theorists and from
those who do not think money is entirely endogenous)?

2. Is it possible to actually estimate a money multiplier from time
series
data if you have uncertainty?

3. Would this estimate, have any utility in use in trying to hit money
supply and interest rate targets?

I have my own biases and suspicions on these questions but I am
interested
in what others think, and specifically, on any Post-Keynesian or other
recent work on this.