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MZM: A Monetary Aggregate for the 1990s?

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Deregulation and financial innovation have wreaked havoc on the relationship of traditionally defined money measures with economic activity and interest rates. In this article, the authors present some tentative evidence that an alternative measure of money —MZM—has endured these events reasonably well. MZM is broader than M1 but essentially narrower than M2, comprising all instruments payable at par on demand. Since 1974, MZM has exhibited a fairly stable relationship with nominal GDP and with its own opportunity cost, suggesting that the aggregate has a potential role for policy.


Suggested citation: Carlson, John, and Benjamin Keen. “MZM: A Monetary Aggregate for the 1990s?” Federal Reserve Bank of Cleveland, Economic Review, vol. 32, no. 2, pp. 15-23, 06.01.1996.

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