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Economic Commentary

A Problem of Seasonal Adjustment

Typically, the public's demand for money fluctuates with changes in the calendar. As a result, money stock data are highly variable and exhibit regular movements within a given year. For example, the money stock typically expands around the year-end holidays and tax-payment time in April. Economists consider these variations to be seasonal; i.e., the variations do not indicate changes in money demand associated with interest rates or with the underlying pace of economic activity. Since Federal Reserve policymakers wish to concentrate on fundamental movements in money demand that are consistent with longer run objectives, seasonal variation is eliminated from the money-supply series by a process known as seasonal adjustment. Thus, policymakers state both long- and short-run targets in seasonally adjusted terms. Accurate seasonal adjustment enables policymakers to accommodate the needs of commerce and to make informed decisions about monetary policy. Accurate seasonal adjustment also helps market participants interpret monetary policy.

The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland or the Board of Governors of the Federal Reserve System. The series editor is Tasia Hane. This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. This paper and its data are subject to revision; please visit for updates.

Suggested Citation

Mugel, Richard. 1984. “A Problem of Seasonal Adjustment.” Federal Reserve Bank of Cleveland, Economic Commentary 11/5/1984.

This work by Federal Reserve Bank of Cleveland is licensed under Creative Commons Attribution-NonCommercial 4.0 International