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November 1980

Monetary Aggregates as Monetary Indicators

by Keith M. Carlson and Scott E. Hein

Early this year, the Federal Reserve Board announced a redefinition of the monetary aggregates. In some cases, the differences between the old and new money measures are quite substantial. While the relationship between the old monetary aggregates and economic activity has received much attention in the economic literature, the usefulness of the new monetary aggregates as monetary indicators has yet to be examined in detail. This article reports some results bearing on this issue.