John A. Tatom analyzes recent movements in velocity. Velocity, the ratio of the nation’s GNP to its money stock, fell sharply in 1982. Since velocity is an indicator of the public’s demand for money, many analysts have interpreted the decline as an unanticipated shift in the public’s desired holdings of transaction balances.
W. W. Brown and G. J. Santoni re-examine the widely held view that permanent increases in the monetary growth rate cause market interest rates initially to decline, then ultimately to rise above their original levels. The path that interest rates follow when adjusting to a change in the monetary growth rate is important for two reasons.
Donald M. Brown investigates the effect of state banking laws on the financial and market characteristics of banks owned by bank holding companies. Brown applies a statistical approach known as probit analysis to a sample of banks from six unit-banking states.
R. W. Hafer examines the effect of monetary and nonmonetary factors in explaining the recent decline in inflation. Hafer finds that the decline in the average rate of money growth during the past few years accounts for the downward trend in inflation.
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