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- Title
Monetary Aggregates as a Target Variable: Comment.
- Authors
Chowdhury, Abdur R.
- Abstract
The purpose of this note is to show that their results are sensitive to the introduction of an interest rate in their trivariate VAR models. In the presence of an interest rate, M2 is also found to be subject to an indirect feedback from income. Moreover, the note also concludes that the choice of an optimal target variable should not be limited only to the monetary aggregates as has been usually done in the literature. Recent works have called into question empirical results which exclude the rate of interest. The above result suggests the problems in using monetary aggregates as an intermediate target variable. Hence the question of selecting an optimal target variable should not be limited only to the monetary aggregates, such as, M1 and M2, as has been usually done in the literature. The possibility of using credit or other financial aggregates should also be explored. In this regard, M-F's study seems to point to the right direction.
- Subjects
MONEY; INTEREST rates
- Publication
Southern Economic Journal, 1987, Vol 54, Issue 1, p227
- ISSN
0038-4038
- Publication type
Article
- DOI
10.2307/1058821