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The Problem of Seasonally Adjusting Money

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When an impending surge in the money supply filled the financial news in March of this year, the reports stated that the surge would result from above-average income tax refunds and early Social Security payments. Consistent with expectations, M-1 (which includes currency plus checkable deposits) grew 11.8 percent (saar) in April 1982. But personal tax refunds occur every year. And early Social Security payments occur whenever the third day of a month falls on a Saturday, Sunday, or holiday. The fact that these and other effects relate to seasonal or recurring events and can be predicted suggests a serious question. Why doesn't seasonal adjustment of the money supply filter all such movements?

When an impending surge in the money supply filled the financial news in March of this year, the reports stated that the surge would result from above-average incometax refunds and early Social Security payments. Consistent with expectations, M-1 (which includes currency plus checkable deposits) grew 11.8 percent (saar) in April 1982. But personal tax refunds occur every year. And early Social Security payments occur whenever the third day of a month falls on a Saturday, Sunday, or holiday. The fact that these and other effects relate to seasonal or recurring events and can be predicted suggests a serious question. Why doesn't seasonal adjustment of the money supply filter all such movements?


Suggested citation: Carlson, John B., 1982. “The Problem of Seasonally Adjusting Money,” Federal Reserve Bank of Cleveland, Economic Commentary, 05.31.1982

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