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Money Still Matters AEI Panel March 22, 2013

Money Still Matters AEI Panel March 22, 2013. David Beckworth, Western Kentucky University. Money Lessons Learned. Traditional View of Money too Narrow Retail Money Assets Cash, checking accounts, saving and time deposits, money market accounts Institutional Money Assets

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Money Still Matters AEI Panel March 22, 2013

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  1. Money Still MattersAEI PanelMarch 22, 2013 David Beckworth, Western Kentucky University

  2. Money Lessons Learned • Traditional View of Money too Narrow • Retail Money Assets • Cash, checking accounts, saving and time deposits, money market accounts • Institutional Money Assets • Treasury bills, MBS, commercial paper, repos

  3. Money Supply

  4. Money Supply

  5. Money Supply

  6. Money Supply

  7. Money Demand

  8. Money Demand

  9. Long-Term Interest Rates

  10. Recap • Supply of Safe Assets Decreased • Demand for Safe Assets Increased • Safe Asset Shortage • Transaction Asset or Money Shortage • Shortfall of Total Dollar Spending

  11. Role for Fed Policy • Return Total Dollar Spending to Pre-crisis Growth Path • Demand for financial intermediation will increase • Private safe asset production will increase • Don’t Target Money Supply • Even though money still matters… • Stable NGDP growth implies stable monetary conditions

  12. Role for Fed Policy

  13. Vector Autoregression1968:Q4-2012:Q4 Quarters After Positive Shock to Expected NGDP Growth Rate

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