Velocity of Money and Productivity Growth: Explaining the 2% Inflation Target in the U.S. (1959–2007)

IF 2.1 Q2 BUSINESS, FINANCE
Christophe Faugere
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Abstract

This article provides a macro-foundation for why the specific value of 2% is a valid inflation target. The approach postulates that innovations generate transactional cost savings by comparison to barter. The optimal velocity of money is derived as a function of productivity growth and of long-term and short-term interest rates, with coefficients reflecting the leverage ratio of depository institutions and the degree of bias in technical progress in the transaction technology. The model is tested for the U.S. (for aggregates M1, M1RS, and M1S) over the period 1959–2007. Setting the inflation target rate equal to the growth rate of velocity leads to an inflation rate near 2% and is akin to pursuing the Friedman k-% rule. This rule provides flexibility to prevent deflation. A long-term Taylor-type rule is derived. A robustness test is also conducted by extending the sample period up to 2023, covering sustained episodes of unconventional U.S. monetary policy.
货币速度与生产力增长:解释美国 2% 的通胀目标(1959-2007 年)
本文提供了一个宏观基础,说明为什么 2% 的具体数值是一个有效的通胀目标。该方法假定,与易货贸易相比,创新可以节省交易成本。最优货币流通速度是生产率增长、长期利率和短期利率的函数,其系数反映了存款机构的杠杆比率和交易技术进步的偏差程度。该模型在 1959-2007 年期间对美国(M1、M1RS 和 M1S 的总量)进行了测试。设定通胀目标率等于速度增长率会导致通胀率接近 2%,类似于弗里德曼的 k%规则。这一规则为防止通货紧缩提供了灵活性。推导出一个长期泰勒型规则。此外,还通过将样本期延长至 2023 年进行了稳健性测试,涵盖了美国非常规货币政策的持续发作。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
3.70
自引率
8.70%
发文量
100
审稿时长
11 weeks
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