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January mittee chose a tentative 3 to 7 percent target range of for M2 last July. Reserve is giving getingr' The FOMC terpret While M2 seems to be durably to nominal income over periods months or longer, sitivity to interest-rate its usefulness related its substantial changes as a short-run course for monetary the level of interest however, the FOMC rates may need to to unanticipated to tolerate measures. Generally, M I includes balances cludes M I plus household savings assets. 2. In fact, even with the increased volatility in the 1980s, the velocity of M2 appears to be stationary around a constant mean level, is to substantialrates, although it may be more interest sensitive. might be willing outside 3. See Moore, George R., Richard D. Porter, and David H. Small, "Modeling the its speci fied ranges. Finally, sensitivity the difficulty posed by interest of M2 is strictly tween M2, prices, presented at the Federal Reserve Board Conference on Monetary Aggregates and Finan- a problem over the short run. The relationship economy. and income cial Sector Behavior in Interdependent be- Economies, May 1988. remains 4. For a thorough analysis of deposit-rate intact over the long run. Consequently, As Federal Reserve Greenspan noted in his testimony before Congress should not conclude Chairman in February Alan targets in achieving term policy objective 5. Congressional testimony of Alan the longer- Greenspan, Chairman, Board of Governors of price stability. that the Federal by John B. Carlson and John N. McElravey behavior see Moore et al. for M2 may prove to be espe- cially useful 1988, one Money and Velocity in the 1980s Disaggregated Demands for M2 and M I in the 1980's: The U.S. Experience," a paper the large short-run of M2 may be consistent Federal Reserve Bank of Cleveland used in making transactions, while M2 in- of eco- As the past several growing M2 growth eCONOMIC COMMeNTORY Footnotes recent issue, for definitions of these If the net ly change nomic conditions. with a steadily policy. were to allow for the uncertainty 1. See the Federal Reserve Bulletin, any the best result of policy actions years have shown, variability to determine target ques- M2's • to in- on the the economy makes tar- in conjunction sen- in 1988, from 3 to 4 percent- about how interest information aggregates with other data on the performance widened vary in response will continue of 18 tionable. age points, target ranges incoming monetary up on monetary P of the Federal Reserve System; February 23, rior to 1980, a sharp slowdown - 1988; Monetary Policy Objectives for 1988. the money supply associated with a downturn nomic activity. was expected Indeed was still expressed John B. Carlson is an economist at the Federal Reserve Bank of Cleveland. John N. The I'iews stated herein are those of the money supply precipitously.' despite Federal Reserve Bank of Cleveland or of the measures rates of M I and M2 System. has remained evidence growth is becoming reflecting suggests to changes P.O. Box 6387 BULK RATE U.S. Postage Paid Cleveland, OH Permit No. 385 affected has affected inal income economic Cleveland, OH 44101 and of financial tion and disinflation. of the interest-rate interest rates may need to vary in to shocks to prespecify to the editor. Requested: Please send corrected mailing label to the Federal Reserve Bank of Cleveland, it for policymakers money Department, P.O. Box 6387, Cleveland, OH 44101 )SSN 0428-1276 an increased sensitivity of money to interest rates. The implications for the role of money in the monetary policy process are also discussed. of interest- relatively In effect, a substantial M I growth usually during small. slowdown this period associated aggregate spending economic activity. in M I growth changes in economic Indeed, Reserve ly relied on M I as a gauge tary policy during in for to mirror activity made it a for monetary the Federal in and, therefore, This tendency changes useful guidepost in was with a slowdown policy. increasing- for mone- growth supply different. It had a systematic ship to interest before The apparent During the current of the M I veloc- was not inherent. decade, has varied substantially in interest has declined 1982, it is not evident following M I velocity with changes rates (see chart 2). More- over, while M I velocity since over stability ity trend, however, Cost and the The substantial any identifiable that it is trend path. is somewhat studies, interest demand interest in demand.r' In these is viewed of its opportunity lower-yielding of (M 1, M2) and is being confirmed money foregone sensitivity aggregates of money function to stable over long periods.i • Opportunity Aggregates studies relation- rates in the short run 1980, but was, and continues be, relatively the monetary the 1970s. The case of M2 velocity Research to The behavior of money has changed greatly in the 1980s. This article identifies the newly emerging patterns in money and its relationship to economic activity. These new patterns, largely a consequence of both deregulation and disinflation, reveal their velocities about how to the economy, an appropriate rate for the nation's Please send copies Address Correction difficult re- of and the uncertainty has become that in the Given the degree sensitivity appeared M I related deregula- money, response provided patterns of M I and M2 ultimately flect the effects materials money This Economic Commentary discusses velocities of reprinted of the activity. how the newly emerging the source is credited. sen- hence has the link between along a 3- I). While rates, the impact rate changes ratio of nom- to money-and 1959 to 1980, was systematically interest in inter- the behavior of money-the From grew smoothly - of est rates. In turn, this interest-rate sitivity in ecoin the behav- trend (see chart velocity more variable, some bank deposits to nominal to be one of This was evident M I velocity that money sensitivity of money was once thought ior of M I velocity. by the increasing velocity income nomics. strong, caused Velocity Trends The relationship percent Recent is also dis- the most stable relationships 1988 drought. Board of Governors of the Federal Reserve Federal Reserve Bank of Cleveland Research Department • in Nevertheless, the problems the short run. This problem cussed. this concern by some analysts slowed the economy authors and not necessarily those of the in to be in eco- 1987 and 1988 as the growth Mclilravey is a research analyst at the Bank. Material may be reprinted 15, 1989 income money as a cost-the of holding balances. As this cost of holding money demand falls (and velocity increases). for money The opportunity given deposit typically rises, the cost of a is measured by the difference between the market interest rate on a relatively risk-free, shortterm asset (such as the 3-month Treasury bill) and the rate paid on that deposit (its own-rate). Prior to financial deregulation, beginning in the late 1970s, virtually all checkable deposits were noninterest bearing. Thus, the opportunity cost of M I balances--comprised of currency and checkable deposits-was essentially equal to the Treasury-bill rate. Interest rates drifted upward over most of the postwar period. Rate levels at the trough of each recession were higher than at the previous trough (see chart 2). Money balances continually became more expensive to hold as interest rates and inflation rose. Economizing on money balances motivated individuals and businesses to find innovative ways to arrange portfolios and to execute transactions while keeping a minimum of checkable deposits. Some innovations during the 1970s circumvented regulations on financial institutions. Interest-rate ceilings, for in- • Disinflation and Financial Deregulation Disinflation and financial deregulation greatly affected the opportunity cost of money and its velocity. Disinflation resulted in sharply falling interest rates, reversing the upward trend that dated back to the 1950s. Deregulation allowed banks to compete more effectively for funds by offering interest-bearing checking accounts and market rates of interest on saving and time deposits. The opportunity cost of most bank deposits fell markedly after 1982 when market rates fell and when banks priced deposits more competitively. The combined impact perhaps was greatest on individual checking accounts. For these deposits, the opportunity cost fell from a high of 18 percent in 1980 to almost zero in 1986. Because banks can now price these deposits competitively, it would seem doubtful that their opportunity cost would ever soar as high as it did in the early 1980s. Moreover, the long-run, 3percent growth trend in M I velocity now appears to have been an artifact of stance, kept banks from paying higher rates as market rates increased. New deposit-like instruments, such as money market mutual funds, were secularly rising inflation and interest rates in a regulated environment. On the other hand, the long-run trendless nature of M2 velocity seems unaf- created to meet the demand of investors for higher yields on their funds, while maintaining their liquidity. fected by the events of the 1980s. others in response to rising market rates. For example, the own-rate on other checkable deposits (OCDs) rises more slowly because it increases a bank's cost of funds more than an increase in the own-rate on time deposits. This is because a change in the rates paid on OCDs affects all existing balances, whereas a change in the rates paid on time deposits affects only newly acquired deposits." The net impact of these tactics is that bank deposits have become more interest sensitive. Some have speculated that this may reflect the increased CHART 1 Ratio 8 aware of alternative assets. Thus, they are more likely to respond to changes in opportunity cost. • Recent Patterns The opportunity cost of OCDs fell substantially with the decline in the Treasury-bill rate from 1984 until early 1987. The decline in opportunity cost spurred rapid growth in these accounts. As rates started rising in 1987, how- ment of M2, are responsible for much of the recent slowdown in M2 growth in the second half of 1988. 7 6 5 3 M2 velocity 2 o 1960 1963 SOURCE: 15 12 '\ J '1...// . 9 Reviewing the experience of the past three years provides a good example of how the portfolio effects of M2 opportunity cost work (see chart 3). Interest rates, opportunity cost, and inflation were approaching their lows in 1986. M2 grew at a rapid rate and, at the end of the year, its level was above the upper bound of the annual target range established for it by the Federal Reserve. 6 T-bill yield 4 3 Although growth in the economy remained strong in 1987, M2 still fell substantially below the bottom of its annual target range because interest o 3~~~~~~~~~~~~~~~~~~~~~~~~--~1960 1963 portunity cost of various deposits constant. With this kind of behavior, interest-rate changes should have less effect overnight basis and thereby earn on aggregates of these deposits. This would seem especially likely for M2 because there are no interest ceil ings on 83 percent of its deposits. risen sharply during 1988. It seems likely that deposit holders would shift second half of 1988. I through which their corporate customers could conveniently purchase securities owned by the bank on an sluggish. Banks tend to raise rates on some deposits more slowly than on 1987 Percent ~18 5 CHART 3 Ratio ing of some types of deposits is quite 1984 , 1\ \/" \ the first half of 1988. OCD growth moderated as short-term rates climbed in the second half of 1988. The ownrate on OCDs has not kept pace with the increase in market rates, so that the opportunity cost has again widened. The interest sensitivity of OCDs accounts for a large part of the post-1980 to adjust to changes in market rates, making their opportunity costs variable. The opportunity costs of OCDs, MMDAs, and savings deposits all have 1981 , tion. In principle, banks can, if they wish, alter most of their own deposit rates promptly in response to changes in market rates and thereby keep the op- all their deposit rates one-for-one with movements in market rates. Experience after deregulation indicates that repric- 1978 6 Also, cash management practices of In fact, however, banks do not adjust 1975 7 businesses evolved as the rising opportunity cost made bank deposits less attractive relative to market instruments. Banks began to offer arrangements and less money was held for the same amount of transactions and, by definition, velocity increased. 1972 Ratio 8 ~------ SOURCE: Own-rates on savings deposits and money market deposit accounts (MMDAs) in M2 also have been slow 1969 CHART 2 ever, OCD growth dropped off sharply. Market rates declined after the stockmarket crash, and OCDs surged during variability of M I velocity. 1966 Board of Governors of the Federal Reserve System. What is curious is that, in the short run, most bank deposits appear more interest sensitive now than before deregula- market yields on funds otherwise held in non interest-bearing deposits. The net effect of the evolution of these innovations and practices was that less Rates paid on small time-deposits, also a large part of M2, have been more responsive to market rates, and their opportunity cost has varied less than that of the nontime deposits. As a consequence, small time-deposits have grown more rapidly than the others, though not enough to offset weakness in the other M2 components in the 4 sophistication of most deposit holders and the improved information and communications technologies that have made funds transfers more convenient. Even if opportunity costs were less affected by changes in interest rates now than before deregulation, deposit holders are much more conscious and out of these assets into more competitively priced instruments. These accounts, which comprise a large seg- 1966 1969 1972 1975 1978 1981 1984 1987 rates and opportunity cost rose, and inflation accelerated. Falling market interest rates after the stock-market crash spurred M2 growth to about 8 percent Board of Governors of the Federal Reserve System. Percent 1.9.....----------------------------------------------------, ,' 8 M2 opportunity costa, \ 1.8 I, I 1.7 through June 1988. A series of policy tightening moves by the Federal Reserve during the spring and summer raised market rates, which led to M2 6 growth below the midpoint of its 1988 range by late in the year. 4 • Policy Implications As the traditional relationship between M I and nominal income broke down, 2 1.6 1 .5 L...&--'-....L. ....•...• .A--lL.....J. •..••.••.••.••••••..&.....&.....L--'--'-..L-.&......I--'--'- 1960 1963 a. Two-quarter SOURCE: 1966 1969 1972 1975 1978 moving average. Board of Governors of the Federal Reserve System. ...•...•.&.....<L......I.•..••.••.•....&......&......&......I--'-_0 1981 1984 1987 M I became less useful in the monetary policy process. The Federal Reserve's Federal Open Market Committeee (FOMC) dropped M I from its reported objectives in 1987; M2 has received the most attention since then. In February, the FOMC chooses and reports its targets for M2 and other financial objectives for 1989. The Com- the difference between the market interest rate on a relatively risk-free, shortterm asset (such as the 3-month Treasury bill) and the rate paid on that deposit (its own-rate). Prior to financial deregulation, beginning in the late 1970s, virtually all checkable deposits were noninterest bearing. Thus, the opportunity cost of M I balances--comprised of currency and checkable deposits-was essentially equal to the Treasury-bill rate. Interest rates drifted upward over most of the postwar period. Rate levels at the trough of each recession were higher than at the previous trough (see chart 2). Money balances continually became more expensive to hold as interest rates and inflation rose. Economizing on money balances motivated individuals and businesses to find innovative ways to arrange portfolios and to execute transactions while keeping a minimum of checkable deposits. Some innovations during the 1970s circumvented regulations on financial institutions. Interest-rate ceilings, for in- • Disinflation and Financial Deregulation Disinflation and financial deregulation greatly affected the opportunity cost of money and its velocity. Disinflation resulted in sharply falling interest rates, reversing the upward trend that dated back to the 1950s. Deregulation allowed banks to compete more effectively for funds by offering interest-bearing checking accounts and market rates of interest on saving and time deposits. The opportunity cost of most bank deposits fell markedly after 1982 when market rates fell and when banks priced deposits more competitively. The combined impact perhaps was greatest on individual checking accounts. For these deposits, the opportunity cost fell from a high of 18 percent in 1980 to almost zero in 1986. Because banks can now price these deposits competitively, it would seem doubtful that their opportunity cost would ever soar as high as it did in the early 1980s. Moreover, the long-run, 3percent growth trend in M I velocity now appears to have been an artifact of stance, kept banks from paying higher rates as market rates increased. New deposit-like instruments, such as money market mutual funds, were secularly rising inflation and interest rates in a regulated environment. On the other hand, the long-run trendless nature of M2 velocity seems unaf- created to meet the demand of investors for higher yields on their funds, while maintaining their liquidity. fected by the events of the 1980s. others in response to rising market rates. For example, the own-rate on other checkable deposits (OCDs) rises more slowly because it increases a bank's cost of funds more than an increase in the own-rate on time deposits. This is because a change in the rates paid on OCDs affects all existing balances, whereas a change in the rates paid on time deposits affects only newly acquired deposits." The net impact of these tactics is that bank deposits have become more interest sensitive. Some have speculated that this may reflect the increased CHART 1 Ratio 8 aware of alternative assets. Thus, they are more likely to respond to changes in opportunity cost. • Recent Patterns The opportunity cost of OCDs fell substantially with the decline in the Treasury-bill rate from 1984 until early 1987. The decline in opportunity cost spurred rapid growth in these accounts. As rates started rising in 1987, how- ment of M2, are responsible for much of the recent slowdown in M2 growth in the second half of 1988. 7 6 5 3 M2 velocity 2 o 1960 1963 SOURCE: 15 12 '\ J '1...// . 9 Reviewing the experience of the past three years provides a good example of how the portfolio effects of M2 opportunity cost work (see chart 3). Interest rates, opportunity cost, and inflation were approaching their lows in 1986. M2 grew at a rapid rate and, at the end of the year, its level was above the upper bound of the annual target range established for it by the Federal Reserve. 6 T-bill yield 4 3 Although growth in the economy remained strong in 1987, M2 still fell substantially below the bottom of its annual target range because interest o 3~~~~~~~~~~~~~~~~~~~~~~~~--~1960 1963 portunity cost of various deposits constant. With this kind of behavior, interest-rate changes should have less effect overnight basis and thereby earn on aggregates of these deposits. This would seem especially likely for M2 because there are no interest ceil ings on 83 percent of its deposits. risen sharply during 1988. It seems likely that deposit holders would shift second half of 1988. I through which their corporate customers could conveniently purchase securities owned by the bank on an sluggish. Banks tend to raise rates on some deposits more slowly than on 1987 Percent ~18 5 CHART 3 Ratio ing of some types of deposits is quite 1984 , 1\ \/" \ the first half of 1988. OCD growth moderated as short-term rates climbed in the second half of 1988. The ownrate on OCDs has not kept pace with the increase in market rates, so that the opportunity cost has again widened. The interest sensitivity of OCDs accounts for a large part of the post-1980 to adjust to changes in market rates, making their opportunity costs variable. The opportunity costs of OCDs, MMDAs, and savings deposits all have 1981 , tion. In principle, banks can, if they wish, alter most of their own deposit rates promptly in response to changes in market rates and thereby keep the op- all their deposit rates one-for-one with movements in market rates. Experience after deregulation indicates that repric- 1978 6 Also, cash management practices of In fact, however, banks do not adjust 1975 7 businesses evolved as the rising opportunity cost made bank deposits less attractive relative to market instruments. Banks began to offer arrangements and less money was held for the same amount of transactions and, by definition, velocity increased. 1972 Ratio 8 ~------ SOURCE: Own-rates on savings deposits and money market deposit accounts (MMDAs) in M2 also have been slow 1969 CHART 2 ever, OCD growth dropped off sharply. Market rates declined after the stockmarket crash, and OCDs surged during variability of M I velocity. 1966 Board of Governors of the Federal Reserve System. What is curious is that, in the short run, most bank deposits appear more interest sensitive now than before deregula- market yields on funds otherwise held in non interest-bearing deposits. The net effect of the evolution of these innovations and practices was that less Rates paid on small time-deposits, also a large part of M2, have been more responsive to market rates, and their opportunity cost has varied less than that of the nontime deposits. As a consequence, small time-deposits have grown more rapidly than the others, though not enough to offset weakness in the other M2 components in the 4 sophistication of most deposit holders and the improved information and communications technologies that have made funds transfers more convenient. Even if opportunity costs were less affected by changes in interest rates now than before deregulation, deposit holders are much more conscious and out of these assets into more competitively priced instruments. These accounts, which comprise a large seg- 1966 1969 1972 1975 1978 1981 1984 1987 rates and opportunity cost rose, and inflation accelerated. Falling market interest rates after the stock-market crash spurred M2 growth to about 8 percent Board of Governors of the Federal Reserve System. Percent 1.9.....----------------------------------------------------, ,' 8 M2 opportunity costa, \ 1.8 I, I 1.7 through June 1988. A series of policy tightening moves by the Federal Reserve during the spring and summer raised market rates, which led to M2 6 growth below the midpoint of its 1988 range by late in the year. 4 • Policy Implications As the traditional relationship between M I and nominal income broke down, 2 1.6 1 .5 L...&--'-....L. ....•...• .A--lL.....J. •..••.••.••.••••••..&.....&.....L--'--'-..L-.&......I--'--'- 1960 1963 a. Two-quarter SOURCE: 1966 1969 1972 1975 1978 moving average. Board of Governors of the Federal Reserve System. ...•...•.&.....<L......I.•..••.••.•....&......&......&......I--'-_0 1981 1984 1987 M I became less useful in the monetary policy process. The Federal Reserve's Federal Open Market Committeee (FOMC) dropped M I from its reported objectives in 1987; M2 has received the most attention since then. In February, the FOMC chooses and reports its targets for M2 and other financial objectives for 1989. The Com- January mittee chose a tentative 3 to 7 percent target range of for M2 last July. Reserve is giving getingr' The FOMC terpret While M2 seems to be durably to nominal income over periods months or longer, sitivity to interest-rate its usefulness related its substantial changes as a short-run course for monetary the level of interest however, the FOMC rates may need to to unanticipated to tolerate measures. Generally, M I includes balances cludes M I plus household savings assets. 2. In fact, even with the increased volatility in the 1980s, the velocity of M2 appears to be stationary around a constant mean level, is to substantialrates, although it may be more interest sensitive. might be willing outside 3. See Moore, George R., Richard D. Porter, and David H. Small, "Modeling the its speci fied ranges. Finally, sensitivity the difficulty posed by interest of M2 is strictly tween M2, prices, presented at the Federal Reserve Board Conference on Monetary Aggregates and Finan- a problem over the short run. The relationship economy. and income cial Sector Behavior in Interdependent be- Economies, May 1988. remains 4. For a thorough analysis of deposit-rate intact over the long run. Consequently, As Federal Reserve Greenspan noted in his testimony before Congress should not conclude Chairman in February Alan targets in achieving term policy objective 5. Congressional testimony of Alan the longer- Greenspan, Chairman, Board of Governors of price stability. that the Federal by John B. Carlson and John N. McElravey behavior see Moore et al. for M2 may prove to be espe- cially useful 1988, one Money and Velocity in the 1980s Disaggregated Demands for M2 and M I in the 1980's: The U.S. Experience," a paper the large short-run of M2 may be consistent Federal Reserve Bank of Cleveland used in making transactions, while M2 in- of eco- As the past several growing M2 growth eCONOMIC COMMeNTORY Footnotes recent issue, for definitions of these If the net ly change nomic conditions. with a steadily policy. were to allow for the uncertainty 1. See the Federal Reserve Bulletin, any the best result of policy actions years have shown, variability to determine target ques- M2's • to in- on the the economy makes tar- in conjunction sen- in 1988, from 3 to 4 percent- about how interest information aggregates with other data on the performance widened vary in response will continue of 18 tionable. age points, target ranges incoming monetary up on monetary P of the Federal Reserve System; February 23, rior to 1980, a sharp slowdown - 1988; Monetary Policy Objectives for 1988. the money supply associated with a downturn nomic activity. was expected Indeed was still expressed John B. Carlson is an economist at the Federal Reserve Bank of Cleveland. John N. The I'iews stated herein are those of the money supply precipitously.' despite Federal Reserve Bank of Cleveland or of the measures rates of M I and M2 System. has remained evidence growth is becoming reflecting suggests to changes P.O. Box 6387 BULK RATE U.S. Postage Paid Cleveland, OH Permit No. 385 affected has affected inal income economic Cleveland, OH 44101 and of financial tion and disinflation. of the interest-rate interest rates may need to vary in to shocks to prespecify to the editor. Requested: Please send corrected mailing label to the Federal Reserve Bank of Cleveland, it for policymakers money Department, P.O. Box 6387, Cleveland, OH 44101 )SSN 0428-1276 an increased sensitivity of money to interest rates. The implications for the role of money in the monetary policy process are also discussed. of interest- relatively In effect, a substantial M I growth usually during small. slowdown this period associated aggregate spending economic activity. in M I growth changes in economic Indeed, Reserve ly relied on M I as a gauge tary policy during in for to mirror activity made it a for monetary the Federal in and, therefore, This tendency changes useful guidepost in was with a slowdown policy. increasing- for mone- growth supply different. It had a systematic ship to interest before The apparent During the current of the M I veloc- was not inherent. decade, has varied substantially in interest has declined 1982, it is not evident following M I velocity with changes rates (see chart 2). More- over, while M I velocity since over stability ity trend, however, Cost and the The substantial any identifiable that it is trend path. is somewhat studies, interest demand interest in demand.r' In these is viewed of its opportunity lower-yielding of (M 1, M2) and is being confirmed money foregone sensitivity aggregates of money function to stable over long periods.i • Opportunity Aggregates studies relation- rates in the short run 1980, but was, and continues be, relatively the monetary the 1970s. The case of M2 velocity Research to The behavior of money has changed greatly in the 1980s. This article identifies the newly emerging patterns in money and its relationship to economic activity. These new patterns, largely a consequence of both deregulation and disinflation, reveal their velocities about how to the economy, an appropriate rate for the nation's Please send copies Address Correction difficult re- of and the uncertainty has become that in the Given the degree sensitivity appeared M I related deregula- money, response provided patterns of M I and M2 ultimately flect the effects materials money This Economic Commentary discusses velocities of reprinted of the activity. how the newly emerging the source is credited. sen- hence has the link between along a 3- I). While rates, the impact rate changes ratio of nom- to money-and 1959 to 1980, was systematically interest in inter- the behavior of money-the From grew smoothly - of est rates. In turn, this interest-rate sitivity in ecoin the behav- trend (see chart velocity more variable, some bank deposits to nominal to be one of This was evident M I velocity that money sensitivity of money was once thought ior of M I velocity. by the increasing velocity income nomics. strong, caused Velocity Trends The relationship percent Recent is also dis- the most stable relationships 1988 drought. Board of Governors of the Federal Reserve Federal Reserve Bank of Cleveland Research Department • in Nevertheless, the problems the short run. This problem cussed. this concern by some analysts slowed the economy authors and not necessarily those of the in to be in eco- 1987 and 1988 as the growth Mclilravey is a research analyst at the Bank. Material may be reprinted 15, 1989 income money as a cost-the of holding balances. As this cost of holding money demand falls (and velocity increases). for money The opportunity given deposit typically rises, the cost of a is measured by
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