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November/December 1994, 
Vol. 76, No. 6
Posted 1994-11-01

The Empirical Properties of a Monetary Aggregate That Adds Bond and Stock Mutual Funds to M2

by Athanasios Orphanides, Brian Reid, and David H. Small

This article examines empirical issues associated with whether M2+ would be useful in the conduct of monetary policy. The three main issues examined are the stability of its demand function, its information content as an indicator of spending, and its controllability. To assess these characteristics of M2+, the authors estimate the demand functions and reduced-form relationships between M2+ and income.