Economic Quarterly

Winter 1994

M2 and Monetary Policy: A Critical Review of the Recent Debate

Michael Dotsey

Recently an intense debate has focused on M2’s usefulness as an intermediate target for monetary policy. A review of two leading contributions to the debate indicates that their empirical results are sensitive to changes in key assumptions. Moreover, their empirical results lack the deep structural foundations that are necessary for reliable policy analysis.

Our Research Focus: Inflation and Monetary Policy

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