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Economic Commentary

M2 Growth in 1995: A Return to Normalcy?

In years past, the growth rates of money measures such as M2 received considerable attention because evidence showed that there was a simple and stable long-run relationship between M2, nominal income, and inflation. Many analysts believed that abrupt changes in money growth induced swings in output, while changes in the trend rate of money growth led to changes in the underlying rate of inflation. Indeed, the view that M2 is an important monetary policy guide is reflected in the fact that the Federal Reserve is required by law to specify growth ranges for the monetary and credit aggregates.

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 paper and its data are subject to revision; please visit for updates.

Suggested Citation

Carlson, John B., and Benjamin Keen. 1995. “M2 Growth in 1995: A Return to Normalcy?” Federal Reserve Bank of Cleveland, Economic Commentary 12/1/1995.

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