Full text of Monetary Trends : March 2010
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MonetaryTrends March 2010 Money Supply, Credit Expansion, and Housing Price Inflation S 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 19 72 74 19 19 19 70 relationship between (i) money growth and either measure of houshould monetary policy be concerned about housing price ing price inflation and (ii) housing inflation and CPI inflation until inflation? Housing prices are affected by the credit supply around 2000. In particular, the steady increase in the housing price because housing purchases are financed by borrowing. inflation rate since the early 2000s is closely associated with the steady When home demand goes up, housing prices also increase. On increase in the money supply during the same period. Overall, the other hand, the cost of borrowing depends on nominal interest housing price inflation appears to lead CPI inflation. rates, which in turn may be influenced by monetary policy. The chart does not provide any causal relationships among the Economists often define inflation as changes in the price level series. M2 is mostly endogenous, determined more or less simultaof all commodities currently produced (the gross domestic product neously with credit via financial intermediation. However, credit and deflator) or consumed (the consumer price index [CPI]). Neither M2 may be driven simultaneously as part of a broader financial intermeasure explicitly includes housing prices because housing purmediation process; a common underlying factor may be the interest chases are considered investments rather than consumption. Rental rate. A lower interest rate may stimulate borrowing and housing prices are included in the CPI; however, they do not fully reflect demand, which in turn may induce higher demand for durable goods. housing prices for at least two reasons: (i) The rental market is Because durable goods are purchased with money, the demand for relatively thin, so rental rates and housing prices do not necessarily money may also increase. As a result, aggregate demand and the follow each other closely; and (ii) during “bubble” periods many money supply may increase, which raises the aggregate price level. people buy houses for investment purposes rather than as primary Therefore, policymakers may want to closely watch housing price residences. This creates a wedge between rental rates and housing inflation, not only because it leads CPI inflation, but also because an prices. The lack of strong correlation between rental rates and overheated housing market may encourage more risk-taking behaviors housing prices is evidenced by greater volatility in housing prices by banks and cause the aggregate money supply to increase, resulting than in the present value of future rents. in excess aggregate demand and higher inflation risk. It is well known that the housing market strongly leads the —Yi Wen business cycle. One reason is that home purchases (especially new home purchases) increase aggregate demand by increasing the demand for 10-Year Moving Average durable goods (such as furniture, home appliances, flooring materials, and so on). Because Percent Change housing prices tend to rise with a rise in the rate 12 M2 of home purchases, it is reasonable to assume Median New Single-Family Home Price Inflation Median Existing Home Price Inflation that home prices and the real economy are well 10 CPI Inflation connected. The chart, which uses post-World War II U.S. 8 data, shows 10-year moving averages of various indicators, including the growth rate of M2 (the solid line on the chart). M2 money stock 6 is composed of currency, travelers checks, demand deposits, checking accounts, savings 4 deposits, small-denomination time deposits, and retail money funds. The chart also shows housing price inflation, measured as the median 2 price of existing homes (the dashed line), new single-family homes (the dotted line), and CPI 0 inflation (the dashed-dotted line). The 10-year moving average captures longer-term relationships for the time series, including a close Views expressed do not necessarily reflect official positions of the Federal Reserve System. research.stlouisfed.org Contents Page 3 4 6 7 8 9 10 11 12 14 15 16 18 Monetary and Financial Indicators at a Glance Monetary Aggregates and Their Components Reserves Markets and Short-Term Credit Flows Senior Loan Officer Opinion Survey on Bank Lending Practices Measures of Expected Inflation Interest Rates Policy-Based Inflation Indicators Implied Forward Rates, Futures Contracts, and Inflation-Indexed Securities Velocity, Gross Domestic Product, and M2 Bank Credit Stock Market Index and Foreign Inflation and Interest Rates Reference Tables Definitions, Notes, and Sources Conventions used in this publication: 1. Unless otherwise indicated, data are monthly. 2. Except where otherwise noted, solid shading indicates recessions, as determined by the National Bureau of Economic Research. The NBER has not yet determined the end of the recession that began in December 2007; however, the hatched shading shows that the recession ended in July 2009. We made this determination based on a statistical model for dating business cycle turning points developed by Marcelle Chauvet and Jeremy Piger (“A Comparison of the Real-Time Performance of Business Cycle Dating Methods,” Journal of Business and Economic Statistics, 2008, 26, 42-49). For more information, see http://www.uoregon.edu/~jpiger/us_recession_probs.htm. 3. Percent change at an annual rate is the simple, not compounded, monthly percent change multiplied by 12. For example, using consecutive months, the percent change at an annual rate in x between month t –1 and the current month t is: [(xτ /x τ – 1 )–1] × 1200. Note that this differs from National Economic Trends. In that publication, monthly percent changes are compounded and expressed as annual growth rates. 4. The percent change from year ago refers to the percent change from the same period in the previous year. For example, the percent change from year ago in x between month t –12 and the current month t is: [(xτ /x τ – 12 )–1] × 100. We welcome your comments addressed to: Editor, Monetary Trends Research Division Federal Reserve Bank of St. Louis P.O. Box 442 St. Louis, MO 63166-0442 On March 23, 2006, the Board of Governors of the Federal Reserve System ceased the publication of the M3 monetary aggregate. It also ceased publishing the following components: large-denomination time deposits, RPs, and eurodollars. or to: stlsFRED@stls.frb.org Monetary Trends is published monthly by the Research Division of the Federal Reserve Bank of St. Louis. Visit the Research Division’s website at research.stlouisfed.org/publications/mt to download the current version of this publication or register for e-mail notification updates. For more information on data in the publication, please visit research.stlouisfed.org/fred2 or call (314) 444-8590. updated through 02/18/10 Monetary Trends M2 and MZM Treasury Yield Curve Billions of dollars Percent 10000 5 9500 4 MZM 9000 Week Ending Friday: 02/13/09 01/15/10 02/12/10 8500 3 8000 M2 7500 2 7000 6500 1 2007 2007 2008 2008 2009 2009 2010 2010 5y 7y 10y 20y 2011 Adjusted Monetary Base Real Treasury Yield Curve Percent change at an annual rate Percent 400 3 300 200 Week Ending Friday: 02/13/09 01/15/10 02/12/10 2 100 0 1 -100 -200 0 2007 2007 2008 2008 2009 2009 2010 2010 Reserve Market Rates 7y 10y 20y Inflation-Indexed Treasury Yield Spreads Percent Percent 8 3 Effective Federal Funds Rate Intended Federal Funds Rate Primary Credit Rate 7 5y 2011 Week Ending Friday: 02/13/09 01/15/10 02/12/10 6 2 5 4 3 1 2 1 0 2007 2007 2008 2008 2009 2009 2010 2010 0 2011 5y 7y 10y 20y Note: Effective December 16, 2008, FOMC reports the intended Federal Funds Rate as a range. Research Division Federal Reserve Bank of St. Louis 3 updated through 02/16/10 Monetary Trends M1 Percent change from year ago 21 14 7 0 -7 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 MZM Percent change from year ago 25 20 15 10 5 0 -5 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 M2 Percent change from year ago 12 9 6 3 0 -3 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 Monetary Services Index - M2** Percent change from year ago 15 10 5 0 -5 1991 91 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 **We will not update the MSI series until we revise the code to accomodate the discontinuation of M3. 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 Research Division 4 Federal Reserve Bank of St. Louis updated through 02/16/10 Monetary Trends Adjusted Monetary Base Percent change from year ago 120 100 80 60 40 20 0 -20 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Domestic Nonfinancial Debt Currency Held by the Nonbank Public Percent change from year ago Percent change from year ago 40 15 10 2011 30 10 20 Total 10 5 Federal 0 -10 0 2002 2003 2004 2005 2006 2007 2008 2009 2002 2003 2004 2005 2006 2007 2008 2009 2010 2007 2007 2008 2008 Small Denomination Time Deposits* Checkable Deposits Percent change from year ago Percent change from year ago 25.0 30 12.5 20 0.0 10 -12.5 0 -25.0 2009 2009 2010 2010 2011 -10 2007 2007 2008 2008 2009 2009 2010 2010 2011 2007 2007 2008 2008 Money Market Mutual Fund Shares Savings Deposits Percent change from year ago Percent change from year ago 60 30 Institutional Funds 2009 2009 2010 2010 2011 20 30 10 Retail Funds 0 0 -30 -10 2007 2007 2008 2008 2009 2009 2010 2010 2011 2007 2007 2008 2008 2009 2009 2010 2010 2011 Research Division Federal Reserve Bank of St. Louis 5 updated through 02/16/10 Monetary Trends Adjusted and Required Reserves Billions of dollars 1500 1000 500 Required | | | Adjusted 0 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 Total Borrowings, nsa 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 Excess Reserves plus RCB Contracts Billions of dollars Billions of dollars 450 1200 300 800 150 400 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 2010 2011 2003 2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009 2010 2011 * Data exclude term auction credit Nonfinancial Commercial Paper Percent change from year ago 60 30 0 -30 -60 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 As of April 10, 2006, the Federal Reserve Board made major changes to its commercial paper calculations. For more information, please refer to http://www.federalreserve.gov/releases/cp/about.htm. 2007 07 2008 08 2009 09 2010 10 2011 Consumer Credit Percent change from year ago 20 10 0 -10 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Research Division 6 Federal Reserve Bank of St. Louis updated through 02/10/10 Monetary Trends Net Percentage of Domestic Respondents Tightening Standards for Commercial and Industrial Loans Percentage 90 Large & Medium Firms 60 30 Small Firms 0 -30 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 Net Percentage of Domestic Respondents Tightening Standards for Commercial Real Estate Loans Percentage 90 60 30 0 -30 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 Net Percentage of Domestic Respondents Tightening Standards for Residential Mortgage Loans Percentage 80 60 40 20 0 -20 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 Net Percentage of Domestic Respondents Tightening Standards for Consumer Loans Percentage 80 60 40 Credit Card Loans 20 0 Other Consumer Loans -20 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09 09 10 10 11 Research Division Federal Reserve Bank of St. Louis 7 updated through 02/02/10 Monetary Trends CPI Inflation and 1-Year-Ahead CPI Inflation Expectations Percent 6 5 Humphrey-Hawkins CPI Inflation Range 4 3 2 | | | | | | | | | | | | CPI Inflation 1 University of Michigan 0 -1 Federal Reserve Bank of Philadelphia -2 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 The shaded region shows the Humphrey-Hawkins CPI inflation range. Beginning in January 2000, the Humphrey-Hawkins inflation range was reported using the PCE price index and therefore is not shown on this graph. 10-Year Ahead PCE Inflation Expectations and Realized Inflation Percent 8 6 4 2 Expected Realized 0 65 70 75 80 85 90 95 00 05 See the notes section for an explanation of the chart. Treasury Security Yield Spreads Real Interest Rates Yield to maturity Percent, Real rate = Nominal rate less year-over-year CPI inflation 6 6 10-Year less 3-Month T-Bill 4 4 2 1-Year Treasury Yield 2 0 | | | | 0 | | | 10-Year less 3-Year Note -2 Federal Funds Rate 3-Year less 3-Month T-Bill -2 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 -4 10 2010 2011 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10 2010 2011 Research Division 8 Federal Reserve Bank of St. Louis updated through 02/02/10 Monetary Trends Short-Term Interest Rates Percent 12 10 Prime Rate 8 90-Day Commercial Paper 6 4 3-Month Treasury Yield 2 0 -2 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 Long-Term Interest Rates Percent 10 Conventional Mortgage 8 | | | | | | 6 4 Corporate Aaa 10-Year Treasury Yield 2 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 Long-Term Interest Rates Short-Term Interest Rates Percent Percent 10 6 8 2008 08 2009 09 2010 10 2011 90-Day Commercial Paper 4 Corporate Baa 6 3-Month Treasury Yield 2 4 0 10-Year Treasury Yield 2 -2 2007 2007 2008 2008 2009 2009 2010 2010 2011 2007 2007 2008 2008 2009 2009 2010 2010 2011 *90-Day Commercial Paper data are not available for December 2005, January 2006, and July 2006. FOMC Intended Federal Funds Rate, Discount Rate, and Primary Credit Rate Percent 8 Intended Federal Funds Rate 6 Primary Credit Rate Discount Rate 4 2 0 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 10 2011 Research Division Federal Reserve Bank of St. Louis 9 updated through 02/16/10 Monetary Trends Federal Funds Rate and Inflation Targets Percent 10 4% 3% 2% 1% 0% Target Inflation Rates 5 Actual 0 -5 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Calculated federal funds rate is based on Taylor's rule. Components of Taylor's Rule Actual and Potential Real GDP PCE Inflation Billions of chain-weighted 2005 dollars Percent change from year ago 15000 5 Potential 4 13000 3 Actual 2 11000 1 0 9000 -1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 See notes section for further explanation. Monetary Base Growth and Inflation Targets Percent 30 25 20 Target Inflation Rates Actual 15 0% 1% 2% 3% 4% 10 5 0 -5 2000 00 01 2001 2002 02 03 2003 2004 04 05 2005 06 2006 07 2007 2008 08 2009 09 10 Calculated base growth is based on McCallum's rule. Actual base growth is percent change from the previous quarter *Actual values for 2008:Q4, 2009:Q1, and 2009:Q4 are 188.38 percent, 60.77 percent, and 56.51, respectively. Components of McCallum's Rule Monetary Base Velocity Growth Real Output Growth Percent Percent 15 8 Recursive Average 10-Year Moving Average | 0 4 -15 -30 0 -45 1-Year Moving Average -60 Quarter to Quarter Growth Rate -4 -75 -8 00 2000 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10 00 2000 01 2001 02 2002 03 2003 04 2004 05 2005 06 2006 07 2007 08 2008 09 2009 10 Research Division 10 Federal Reserve Bank of St. Louis updated through 02/18/10 Monetary Trends Implied One-Year Forward Rates Rates on 3-Month Eurodollar Futures Percent 6 Percent, daily data 0.52 Week Ending: 02/13/09 01/15/10 02/12/10 5 4 Apr 2010 0.43 Mar 2010 3 0.34 2 1 Feb 2010 0 2y 5y 3y 7y 10y 0.25 12/14 12/21 12/28 01/04 01/11 01/18 01/25 02/01 02/08 02/15 Rates on Selected Federal Funds Futures Contracts Rates on Federal Funds Futures on Selected Dates Percent, daily data Percent 0.24 0.28 Apr 2010 12/11/2009 0.21 0.24 0.18 0.20 0.15 0.16 01/15/2010 02/12/2010 Mar 2010 Feb 2010 0.12 0.12 12/14 12/21 12/28 01/04 01/11 01/18 01/25 02/01 02/08 02/15 Feb Mar Apr May Jun Jul Contract Month Inflation-Indexed Treasury Securities Inflation-Indexed Treasury Yield Spreads Weekly data Weekly data Percent Percent 4.00 4.00 2.67 1.67 1.33 -0.67 20 0.00 2008 15 10 2009 2010 20 15 -3.00 2008 Maturity 5 2011 . Note: Yields are inflation-indexed constant maturity U.S. Treasury securities 10 2009 2010 Horizon 5 2011 . Note: Yield spread is between nominal and inflation-indexed constant maturity U.S. Treasury securities. Inflation-Indexed 10-Year Government Notes Inflation-Indexed 10-Year Government Yield Spreads Percent, weekly data Percent, weekly data 5 4 U.K. U.K. 4 3 | | | 2 U.S. 2 1 France U.S. | | | 0 France 0 -1 -2 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Research Division Federal Reserve Bank of St. Louis 11 updated through 02/16/10 Monetary Trends Velocity Nominal GDP/MZM, Nominal GDP/M2 (Ratio Scale) 2.75 2.50 MZM 2.25 2.00 M2 1.75 1.50 1.25 11688 92 12054 93 12419 94 12784 95 13149 96 13515 97 13880 98 14245 99 14610 00 14976 01 15341 02 15706 03 16071 04 16437 05 16802 06 17167 07 17532 08 17898 09 18263 Interest Rates Percent 8 6 3-Month T-Bill 4 M2 Own MZM Own 2 0 11688 92 12054 93 12419 94 12784 95 13149 96 13515 97 13880 98 14245 99 14610 00 14976 15341 02 15706 03 16071 04 16437 05 16802 06 17167 07 17532 08 17898 MZM Velocity and Interest Rate Spread M2 Velocity and Interest Rate Spread Ratio Scale Ratio Scale 3.50 09 18263 2.25 Velocity = Nominal GDP / M2 Velocity = Nominal GDP / MZM 01 3.00 2.50 2.00 1.50 2.00 1.75 1.50 1974Q1 to 1993Q4 1994Q1 to present 1974Q1 to 1993Q4 1994Q1 to present 1.25 1.00 -1 0 1 2 3 4 5 6 7 8 9 10 Interest Rate Spread = 3-Month T-Bill less MZM Own Rate 11 -1 0 1 2 3 4 5 6 Interest Rate Spread = 3-Month T-Bill less M2 Own Rate Research Division 12 Federal Reserve Bank of St. Louis updated through 02/16/10 Monetary Trends Gross Domestic Product Percent change from year ago 10 8 6 4 2 0 -2 -4 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Dashed lines indicate 10-year moving averages. Real Gross Domestic Product Percent change from year ago 6 3 0 -3 -6 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Dashed lines indicate 10-year moving averages. Gross Domestic Product Price Index Percent change from year ago 5 4 3 2 1 0 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Dashed lines indicate 10-year moving averages. M2 Percent change from year ago 12 9 6 3 0 1992 92 1993 93 1994 94 1995 95 1996 96 1997 97 1998 98 1999 99 2000 00 2001 01 2002 02 2003 03 2004 04 2005 05 2006 06 2007 07 2008 08 2009 09 2010 Dashed lines indicate 10-year moving averages. Research Division Federal Reserve Bank of St. Louis 13 updated through 02/16/10 Monetary Trends Bank Credit Percent change from year ago 20 10 0 -10 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Investment Securities in Bank Credit at Commercial Banks Percent change from year ago 20 15 10 5 0 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Total Loans and Leases in Bank Credit at Commercial Banks Percent change from year ago 20 10 0 -10 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Commercial and Industrial Loans at Commercial Banks Percent change from year ago 30 20 10 0 -10 -20 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 Research Division 14 Federal Reserve Bank of St. Louis updated through 02/09/10 Monetary Trends Standard & Poor's 500 1800 150 1440 120 Composite Index (left) 1080 90 720 60 Price/Earnings Ratio (right) 360 30 0 0 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Recent Inflation and Long-Term Interest Rates Consumer Price Inflation Rates Long-Term Government Bond Rates Percent change from year ago 2009Q1 2009Q2 2009Q3 2009Q4 United States Sep09 Percent Oct09 Nov09 Dec09 -0.18 -0.94 -1.55 1.47 3.40 3.39 3.40 3.59 Canada 1.25 0.06 -0.87 0.79 3.37 3.42 3.41 3.43 France 0.63 -0.21 -0.42 0.36 3.59 3.56 3.55 3.48 Germany 0.82 0.25 -0.25 0.44 3.26 3.21 3.22 3.14 Italy Japan United Kingdom * Copyright 1.48 0.85 0.12 0.65 4.09 4.10 4.06 4.01 -0.07 -0.98 -2.31 -2.03 1.26 1.40 1.25 1.27 3.01 2.12 1.46 2.09 3.66 3.57 3.76 3.89 , 2009, Organisation for Economic Cooperation and Development, OECD Main Economic Indicators (www.oecd.org). Inflation and Long-Term Interest Rate Differentials Percent Percent 2 4 Germany 2 0 U.K. Canada U.K. 0 Japan -2 Germany -2 Canada Inflation differential = Foreign inflation less U.S. inflation Long-term rate differential = Foreign rate less U.S. rate -4 01/01/2006 Japan -4 2006 01/01/2007 2007 01/01/2008 2008 01/01/2009 2009 01/01/2010 01/01/2006 2006 01/01/2007 2007 01/01/2008 2008 01/01/2009 2009 01/01/2010 Research Division Federal Reserve Bank of St. Louis 15 updated through 02/16/10 Monetary Trends Money Stock M1 MZM M2 M3* Bank Adjusted Credit Monetary Base Reserves MSI M2** 2005. 2006. 1371.763 6708.412 6530.373 9786.477 6979.881 806.628 96.560 343.539 1374.373 6999.284 6873.785 10270.74 7654.675 835.039 94.913 . 2007. 2008. 1373.157 7633.092 7307.280 . 8405.882 850.567 94.184 . 1433.315 8704.525 7823.744 . 9122.718 1009.796 232.199 . 2009. 1628.204 9525.320 8421.241 . 9231.413 1796.607 944.872 . 2007 1 1370.052 7283.043 7138.852 . 8126.387 846.309 94.123 . . 2 1374.886 7459.548 7250.549 . 8238.876 849.917 93.536 . . 3 1370.933 7724.906 7364.638 . 8482.787 852.247 95.410 . . 4 1376.757 8064.873 7475.082 . 8775.478 853.795 93.666 . 2008 1 1385.938 8382.047 7621.846 . 8975.618 856.293 96.145 . . 2 1393.902 8661.816 7735.455 . 8990.338 859.364 94.409 . . 3 1424.884 8770.613 7830.474 . 9084.945 892.790 117.867 . . 4 1528.538 9003.623 8107.199 . 9439.970 1430.736 620.373 . 2009 1 1566.707 9398.846 8345.331 . 9337.750 1663.090 820.775 . . 2 1608.890 9535.093 8400.692 . 9308.185 1763.779 917.209 . . 3 1652.996 9580.930 8434.086 . 9195.976 1747.162 895.453 . . 4 1684.224 9586.413 8504.856 . 9083.742 2012.399 1146.052 . . 2008 Jan 1381.146 8196.159 7542.254 . 8926.168 851.409 95.046 . Feb 1386.988 8405.875 7631.682 . 8965.333 856.955 96.202 . . Mar 1389.679 8544.106 7691.603 . 9035.353 860.514 97.187 . . Apr 1392.086 8612.117 7716.287 . 8976.564 855.200 94.328 . . May 1391.474 8663.717 7739.014 . 9001.601 859.886 95.108 . . Jun 1398.146 8709.614 7751.065 . 8992.851 863.006 93.792 . . 1415.119 8765.711 7802.660 . 9021.507 870.737 97.042 . . Jul Aug 1400.022 8750.308 7790.579 . 9038.214 871.497 96.703 . . Sep 1459.510 8795.819 7898.182 . 9195.113 936.136 159.857 . . Oct 1472.746 8842.954 8014.681 . 9541.168 1142.178 347.631 . . Nov 1518.122 8969.315 8065.311 . 9406.200 1480.765 674.097 . . Dec 1594.746 9198.600 8241.606 . 9372.542 1669.266 839.392 . 2009 Jan 1573.818 9329.335 8302.598 . 9337.104 1730.475 870.241 . . Feb 1562.052 9397.774 8340.668 . 9347.561 1590.273 758.699 . . Mar 1564.251 9469.428 8392.727 . 9328.584 1668.522 833.384 . . Apr 1592.673 9453.042 8343.736 . 9266.851 1787.815 949.453 . . May 1592.995 9560.253 8416.120 . 9338.100 1799.382 946.295 . . Jun 1641.002 9591.983 8442.219 . 9319.603 1704.141 855.879 . . Jul Aug 1649.859 9594.853 8436.584 . 9249.622 1693.710 841.495 . . 1648.293 9556.356 8413.290 . 9210.442 1728.095 879.603 . . Sep 1660.836 9591.580 8452.385 . 9127.863 1819.680 965.261 . . Oct 1673.776 9591.300 8481.375 . 9053.276 1975.382 1122.290 . . Nov 1685.557 9592.339 8508.930 . 9109.891 2044.532 1182.291 . . Dec 1693.340 9575.601 8524.264 . 9088.059 2017.282 1133.576 . 2010 Jan 1676.510 9500.234 8463.069 . 9003.655 2010.120 1105.572 . Note: All values are given in billions of dollars. *See table of contents for changes to the series. **We will not update the MSI series until we revise the code to accommodate the discontinuation of M3. Research Division 16 Federal Reserve Bank of St. Louis updated through 02/02/10 Monetary Trends Federal Primary Prime 3-mo Funds Credit Rate Rate CDs 3-mo Treasury Yields 3-yr 10-yr Corporate Municipal Aaa Bonds Aaa Bonds Conventional Mortgage 2005. 2006. 2007. 2008. 2009. 3.21 4.96 5.02 1.93 0.16 4.19 5.96 5.86 2.39 0.50 6.19 7.96 8.05 5.09 3.25 3.51 5.15 5.27 2.97 0.56 3.21 4.85 4.47 1.39 0.15 3.93 4.77 4.34 2.24 1.43 4.29 4.79 4.63 3.67 3.26 5.23 5.59 5.56 5.63 5.31 4.28 4.15 4.13 4.58 4.27 5.86 6.41 6.34 6.04 5.04 1 2 3 4 5.26 5.25 5.07 4.50 6.25 6.25 5.93 5.02 8.25 8.25 8.18 7.52 5.31 5.32 5.42 5.02 5.12 4.87 4.42 3.47 4.68 4.76 4.41 3.50 4.68 4.85 4.73 4.26 5.36 5.58 5.75 5.53 3.91 4.13 4.27 4.24 6.22 6.37 6.55 6.23 1 2 3 4 3.18 2.09 1.94 0.51 3.67 2.33 2.25 1.31 6.21 5.08 5.00 4.06 3.23 2.76 3.06 2.82 2.09 1.65 1.52 0.30 2.17 2.67 2.63 1.48 3.66 3.89 3.86 3.25 5.46 5.60 5.65 5.82 4.39 4.43 4.50 5.02 5.88 6.09 6.31 5.87 1 2 3 4 0.18 0.18 0.16 0.12 0.50 0.50 0.50 0.50 3.25 3.25 3.25 3.25 1.08 0.62 0.30 0.22 0.22 0.17 0.16 0.06 1.27 1.49 1.56 1.39 2.74 3.31 3.52 3.46 5.27 5.51 5.27 5.20 4.64 4.43 4.11 3.91 5.06 5.03 5.16 4.92 2008 Jan . Feb Mar . 3.94 2.98 2.61 4.48 3.50 3.04 6.98 6.00 5.66 3.84 3.06 2.79 2.82 2.17 1.28 2.51 2.19 1.80 3.74 3.74 3.51 5.33 5.53 5.51 4.13 4.42 4.63 5.76 5.92 5.97 . . . Apr May Jun 2.28 1.98 2.00 2.49 2.25 2.25 5.24 5.00 5.00 2.85 2.66 2.76 1.31 1.76 1.89 2.23 2.69 3.08 3.68 3.88 4.10 5.55 5.57 5.68 4.45 4.34 4.50 5.92 6.04 6.32 . . . Jul Aug Sep 2.01 2.00 1.81 2.25 2.25 2.25 5.00 5.00 5.00 2.79 2.79 3.59 1.66 1.75 1.15 2.87 2.70 2.32 4.01 3.89 3.69 5.67 5.64 5.65 4.44 4.44 4.61 6.43 6.48 6.04 . . . Oct Nov Dec 0.97 0.39 0.16 1.81 1.25 0.86 4.56 4.00 3.61 4.32 2.36 1.77 0.69 0.19 0.03 1.86 1.51 1.07 3.81 3.53 2.42 6.28 6.12 5.05 5.05 4.83 5.17 6.20 6.09 5.33 2009 Jan . Feb Mar . 0.15 0.22 0.18 0.50 0.50 0.50 3.25 3.25 3.25 1.02 1.16 1.07 0.13 0.30 0.22 1.13 1.37 1.31 2.52 2.87 2.82 5.05 5.27 5.50 4.64 4.56 4.74 5.06 5.13 5.00 . . . Apr May Jun 0.15 0.18 0.21 0.50 0.50 0.50 3.25 3.25 3.25 0.89 0.57 0.39 0.16 0.18 0.18 1.32 1.39 1.76 2.93 3.29 3.72 5.39 5.54 5.61 4.48 4.26 4.56 4.81 4.86 5.42 . . . Jul Aug Sep 0.16 0.16 0.15 0.50 0.50 0.50 3.25 3.25 3.25 0.35 0.30 0.25 0.18 0.17 0.12 1.55 1.65 1.48 3.56 3.59 3.40 5.41 5.26 5.13 4.36 4.17 3.81 5.22 5.19 5.06 . . . Oct Nov Dec 0.12 0.12 0.12 0.50 0.50 0.50 3.25 3.25 3.25 0.24 0.21 0.22 0.07 0.05 0.05 1.46 1.32 1.38 3.39 3.40 3.59 5.15 5.19 5.26 3.85 3.99 3.89 4.95 4.88 4.93 2010 Jan 0.11 0.50 3.25 0.20 0.06 1.49 3.73 5.26 . 5.03 2007 . . . 2008 . . . 2009 . . . Note: All values are given as a percent at an annual rate. Research Division Federal Reserve Bank of St. Louis 17 updated through 02/16/10 Monetary Trends M1 MZM M2 M3* Percent change at an annual rate 2005. 2006. 2007. 2008. 2009. 2.03 0.19 -0.09 4.38 13.60 2.11 4.34 9.06 14.04 9.43 4.23 5.26 6.31 7.07 7.64 5.97 4.95 1 2 3 4 0.08 1.41 -1.15 1.70 6.58 9.69 14.23 17.60 5.89 6.26 6.29 6.00 . . . . 1 2 3 4 2.67 2.30 8.89 29.10 15.73 13.35 5.02 10.63 7.85 5.96 4.91 14.14 . . . . 1 2 3 4 9.99 10.77 10.97 7.56 17.56 5.80 1.92 0.23 11.75 2.65 1.59 3.36 . . . . 2008 Jan . Feb Mar . 4.68 5.08 2.33 6.71 30.70 19.73 5.25 14.23 9.42 . . . . . . Apr May Jun 2.08 -0.53 5.75 9.55 7.19 6.36 3.85 3.53 1.87 . . . . . . Jul Aug Sep 14.57 -12.80 50.99 7.73 -2.11 6.24 7.99 -1.86 16.57 . . . . . . Oct Nov Dec 10.88 36.97 60.57 6.43 17.15 30.68 17.70 7.58 26.23 . . . 2009 Jan . Feb Mar . -15.75 -8.97 1.69 17.05 8.80 9.15 8.88 5.50 7.49 . . . . . . Apr May Jun 21.80 0.24 36.16 -2.08 13.61 3.98 -7.00 10.41 3.72 . . . . . . Jul Aug Sep 6.48 -1.14 9.13 0.36 -4.81 4.42 -0.80 -3.31 5.58 . . . . . . Oct Nov Dec 9.35 8.45 5.54 -0.04 0.13 -2.09 4.12 3.90 2.16 . . . 2010 Jan -11.93 -9.44 -8.61 . 2007 . . . 2008 . . . 2009 . . . . . . *See table of contents for changes to the series. Research Division 18 Federal Reserve Bank of St. Louis Monetary Trends Definitions M1: The sum of currency held outside the vaults of depository institutions, Federal Reserve Banks, and the U.S. Treasury; travelers checks; and demand and other checkable deposits issued by financial institutions (except demand deposits due to the Treasury and depository institutions), minus cash items in process of collection and Federal Reserve float. MZM (money, zero maturity): M2 minus small-denomination time deposits, plus institutional money market mutual funds (that is, those included in M3 but excluded from M2). The label MZM was coined by William Poole (1991); the aggregate itself was proposed earlier by Motley (1988). M2: M1 plus savings deposits (including money market deposit accounts) and small-denomination (under $100,000) time deposits issued by financial institutions; and shares in retail money market mutual funds (funds with initial investments under $50,000), net of retirement accounts. M3: M2 plus large-denomination ($100,000 or more) time deposits; repurchase agreements issued by depository institutions; Eurodollar deposits, specifically, dollar-denominated deposits due to nonbank U.S. addresses held at foreign offices of U.S. banks worldwide and all banking offices in Canada and the United Kingdom; and institutional money market mutual funds (funds with initial investments of $50,000 or more). Bank Credit: All loans, leases, and securities held by commercial banks. Domestic Nonfinancial Debt: Total credit market liabilities of the U.S. Treasury, federally sponsored agencies, state and local governments, households, and nonfinancial firms. End-of-period basis. Adjusted Monetary Base: The sum of currency in circulation outside Federal Reserve Banks and the U.S. Treasury, deposits of depository financial institutions at Federal Reserve Banks, and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This series is a spliced chain index; see Anderson and Rasche (1996a,b, 2001, 2003). Adjusted Reserves: The sum of vault cash and Federal Reserve Bank deposits held by depository institutions and an adjustment for the effects of changes in statutory reserve requirements on the quantity of base money held by depositories. This spliced chain index is numerically larger than the Board of Governors’ measure, which excludes vault cash not used to satisfy statutory reserve requirements and Federal Reserve Bank deposits used to satisfy required clearing balance contracts; see Anderson and Rasche (1996a, 2001, 2003). Monetary Services Index: An index that measures the flow of monetary services received by households and firms from their holdings of liquid assets; see Anderson, Jones, and Nesmith (1997). Indexes are shown for the assets included in M2, with additional data at research.stlouisfed.org/msi/index.html. Note: M1, M2, M3, Bank Credit, and Domestic Nonfinancial Debt are constructed and published by the Board of Governors of the Federal Reserve System. For details, see Statistical Supplement to the Federal Reserve Bulletin, tables 1.21 and 1.26. MZM, Adjusted Monetary Base, Adjusted Reserves, and Monetary Services Index are constructed and published by the Research Division of the Federal Reserve Bank of St. Louis. Notes Page 3: Readers are cautioned that, since early 1994, the level and growth of M1 have been depressed by retail sweep programs that reclassify transactions deposits (demand deposits and other checkable deposits) as savings deposits overnight, thereby reducing banks’ required reserves; see Anderson and Rasche (2001) and research.stlouisfed.org/aggreg/swdata.html. Primary Credit Rate, Discount Rate, and Intended Federal Funds Rate shown in the chart Reserve Market Rates are plotted as of the date of the change, while the Effective Federal Funds Rate is plotted as of the end of the month. Interest rates in the table are monthly averages from the Board of Governors H.15 Statistical Release. The Treasury Yield Curve and Real Treasury Yield Curve show constant maturity yields calculated by the U.S. Treasury for securities 5, 7, 10, and 20 years to maturity. Inflation-Indexed Treasury Yield Spreads are a measure of inflation compensation at those horizons, and it is simply the Research Division Federal Reserve Bank of St. Louis nominal constant maturity yield less the real constant maturity yield. Daily data and descriptions are available at research.stlouisfed.org/fred2/. See also Statistical Supplement to the Federal Reserve Bulletin, table 1.35. The 30-year constant maturity series was discontinued by the Treasury as of February 18, 2002. Page 5: Checkable Deposits is the sum of demand and other checkable deposits. Savings Deposits is the sum of money market deposit accounts and passbook and statement savings. Time Deposits have a minimum initial maturity of 7 days. Retail Money Market Mutual Funds are included in M2. Institutional money market funds are not included in M2. Page 6: Excess Reserves plus RCB (Required Clearing Balance) Contracts equals the amount of deposits at Federal Reserve Banks held by depository institutions but not applied to satisfy statutory reserve requirements. (This measure excludes the vault cash held by depository institutions that is not applied to satisfy statutory reserve requirements.) Consumer Credit includes most short- and intermediate-term credit extended to individuals. See Statistical Supplement to the Federal Reserve Bulletin, table 1.55. Page 7: Data are reported in the Senior Loan Officer Opinion Survey on Bank Lending Practices. Page 8: Inflation Expectations measures include the quarterly Federal Reserve Bank of Philadelphia Survey of Professional Forecasters, the monthly University of Michigan Survey Research Center’s Surveys of Consumers, and the annual Federal Open Market Committee (FOMC) range as reported to the Congress in the February testimony that accompanies the Monetary Policy Report to the Congress. Beginning February 2000, the FOMC began using the personal consumption expenditures (PCE) price index to report its inflation range; the FOMC then switched to the PCE chain-type price index excluding food and energy prices (“core”) beginning July 2004. Accordingly, neither are shown on this graph. CPI Inflation is the percentage change from a year ago in the consumer price index for all urban consumers. Real Interest Rates are ex post measures, equal to nominal rates minus year-over-year CPI inflation. From 1991 to the present the source of the long-term PCE inflation expectations data is the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters. Prior to 1991, the data were obtained from the Board of Governors of the Federal Reserve System. Realized (actual) inflation is the annualized rate of change for the 40-quarter period that corresponds to the forecast horizon (the expectations measure). For example, in 1965:Q1, annualized PCE inflation over the next 40 quarters was expected to average 1.7 percent. In actuality, the average annualized rate of change measured 4.8 percent from 1965:Q1 to 1975:Q1. Thus, the vertical distance between the two lines in the chart at any point is the forecast error. Page 9: FOMC Intended Federal Funds Rate is the level (or midpoint of the range, if applicable) of the federal funds rate that the staff of the FOMC expected to be consistent with the desired degree of pressure on bank reserve positions. In recent years, the FOMC has set an explicit target for the federal funds rate. Page 10: Federal Funds Rate and Inflation Targets shows the observed federal funds rate, quarterly, and the level of the funds rate implied by applying Taylor’s (1993) equation ft*= 2.5 + π t –1 + (π t –1 – π* )/2 + 100 × (yt –1 – yt –1P )/2 to five alternative target inflation rates, π* = 0, 1, 2, 3, 4 percent, where ft* is the implied federal funds rate, π t –1 is the previous period’s inflation rate (PCE) measured on a year-over-year basis, yt –1 is the log of the previous period’s level of real gross domestic product (GDP), and yt –1P is the log of an estimate of the previous period’s level of potential output. Potential Real GDP is estimated by the Congressional Budget Office (CBO). Monetary Base Growth and Inflation Targets shows the quarterly growth of the adjusted monetary base implied by applying McCallum’s (2000, p. 52) equation Δbt = Δxt* − Δvta + λ ( Δxt* − Δxt −1 ), Δxt* = π * + Δyt* to five alternative target inflation rates, π* = 0, 1, 2, 3, 4 percent, where Δbt is the implied growth rate of the adjusted monetary base, Δy*t is the 10-year 19 Monetary Trends moving average growth in real GDP, Δνtα is the average base velocity growth (calculated recursively), Δxt–1 is the lag growth rate of nominal GDP, and λ = 0.5. Page 11: Implied One-Year Forward Rates are calculated by this Bank from Treasury constant maturity yields. Yields to maturity, R(m), for securities with m = 1,..., 10 years to maturity are obtained by linear interpolation between reported yields. These yields are smoothed by fitting the regression suggested by Nelson and Siegel (1987), R(m) = a0 + (a1 + a2 )(1 – e–m/50 )/(m/50) – a2 × e–m/50, and forward rates are calculated from these smoothed yields using equation (a) in table 13.1 of Shiller (1990), f(m) = [D(m)R(m) – D(m–1)] / [D(m) – D(m–1)], where duration is approximated as D(m) = (1 – e –R(m) × m)/R(m). These rates are linear approximations to the true instantaneous forward rates; see Shiller (1990). For a discussion of the use of forward rates as indicators of inflation expectations, see Sharpe (1997). Rates on 3-Month Eurodollar Futures and Rates on Selected Federal Funds Futures Contracts trace through time the yield on three specific contracts. Rates on Federal Funds Futures on Selected Dates displays a single day’s snapshot of yields for contracts expiring in the months shown on the horizontal axis. Inflation-Indexed Treasury Securities and Yield Spreads are those plotted on page 3. Inflation-Indexed 10-Year Government Notes shows the yield of an inflation-indexed note that is scheduled to mature in approximately (but not greater than) 10 years. The current French note has a maturity date of 7/25/2015, the current U.K. note has a maturity date of 8/16/2013, and the current U.S. note has a maturity date of 1/15/2018. Inflation-Indexed Treasury Yield Spreads and InflationIndexed 10-Year Government Yield Spreads equal the difference between the yields on the most recently issued inflation-indexed securities and the unadjusted security yields of similar maturity. Page 12: Velocity (for MZM and M2) equals the ratio of GDP, measured in current dollars, to the level of the monetary aggregate. MZM and M2 Own Rates are weighted averages of the rates received by households and firms on the assets included in the aggregates. Prior to 1982, the 3-month T-bill rates are secondary market yields. From 1982 forward, rates are 3-month constant maturity yields. Page 13: Real Gross Domestic Product is GDP as measured in chained 2000 dollars. The Gross Domestic Product Price Index is the implicit price deflator for GDP, which is defined by the Bureau of Economic Analysis, U.S. Department of Commerce, as the ratio of GDP measured in current dollars to GDP measured in chained 2005 dollars. Page 14: Investment Securities are all securities held by commercial banks in both investment and trading accounts. Page 15: Inflation Rate Differentials are the differences between the foreign consumer price inflation rates and year-over-year changes in the U.S. all-items Consumer Price Index. Page 17: Treasury Yields are Treasury constant maturities as reported in the Board of Governors of the Federal Reserve System’s H.15 release. Sources Agence France Trésor: French note yields. Bank of Canada: Canadian note yields. Bank of England: U.K. note yields. Board of Governors of the Federal Reserve System: Monetary aggregates and components: H.6 release. Bank credit and components: H.8 release. Consumer credit: G.19 release. Required reserves, excess reserves, clearing balance contracts, and discount window borrowing: H.4.1 and H.3 releases. Interest rates: H.15 release. Nonfinancial commercial paper: Board of Governors website. Nonfinancial debt: Z.1 release. M2 own rate. Senior Loan Officer Opinion Survey on Bank Lending Practices. 20 Bureau of Economic Analysis: GDP. Bureau of Labor Statistics: CPI. Chicago Board of Trade: Federal funds futures contract. Chicago Mercantile Exchange: Eurodollar futures. Congressional Budget Office: Potential real GDP. Federal Reserve Bank of Philadelphia: Survey of Professional Forecasters inflation expectations. Federal Reserve Bank of St. Louis: Adjusted monetary base and adjusted reserves, monetary services index, MZM own rate, one-year forward rates. Organization for Economic Cooperation and Development: International interest and inflation rates. Standard & Poor’s: Stock price-earnings ratio, stock price composite index. University of Michigan Survey Research Center: Median expected price change. U.S. Department of the Treasury: U.S. security yields. References Anderson, Richard G. and Robert H. Rasche (1996a). “A Revised Measure of the St. Louis Adjusted Monetary Base,” Federal Reserve Bank of St. Louis Review, March/April, 78(2), pp. 3-13.* ____ and ____(1996b). “Measuring the Adjusted Monetary Base in an Era of Financial Change,” Federal Reserve Bank of St. Louis Review, November/ December, 78(6), pp. 3-37.* ____ and ____(2001). “Retail Sweep Programs and Bank Reserves, 19941999,” Federal Reserve Bank of St. Louis Review, January/February, 83(1), pp. 51-72.* ____ and ____ , with Jeffrey Loesel (2003). “A Reconstruction of the Federal Reserve Bank of St. Louis Adjusted Monetary Base and Reserves,” Federal Reserve Bank of St. Louis Review, September/October, 85(5), pp. 39-70.* ____ , Barry E. Jones and Travis D. Nesmith (1997). “Special Report: The Monetary Services Indexes Project of the Federal Reserve Bank of St. Louis,” Federal Reserve Bank of St. Louis Review, January/February, 79(1), pp. 31-82.* McCallum, Bennett T. (2000). “Alternative Monetary Policy Rules: A Comparison with Historical Settings for the United States, the United Kingdom, and Japa,” Federal Reserve Bank of Richmond Economic Quarterly, vol. 86/1, Winter. Motley, Brian (1988). “Should M2 Be Redefined?” Federal Reserve Bank of San Francisco Economic Review, Winter, pp. 33-51. Nelson, Charles R. and Andrew F. Siegel (1987). “Parsimonious Modeling of Yield Curves,” Journal of Business, October, pp. 473-89. Poole, William (1991). Statement before the Subcommittee on Domestic Monetary Policy of the Committee on Banking, Finance and Urban Affairs, U.S. House of Representatives, November 6, 1991. Government Printing Office, Serial No. 102-82. Sharpe, William F. (1997). Macro-Investment Analysis, on-line textbook available at www.stanford.edu/~wfsharpe/mia/mia.htm. Shiller, Robert (1990). “The Term Structure of Interest Rates,” Handbook of Monetary Economics, vol. 1, B. Friedman and F. Hahn, eds., pp. 627-722. Taylor, John B. (1993). “Discretion versus Policy Rules in Practice,” CarnegieRochester Conference Series on Public Policy, vol. 39, pp. 195-214. Note: *Available on the Internet at research.stlouisfed.org/publications/review/. Research Division Federal Reserve Bank of St. Louis
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