Date of Award

Spring 5-1997

Document Type


Degree Name

Master of Arts (MA)



Committee Director

Raymond S. Strangways

Committee Member

Vinod B. Agarwal

Committee Member

Usman A. Qureshi

Call Number for Print

Special Collections LD4331.E26 C36


This thesis examines the linkages among the monetary aggregates, inflation, and the economy through vector auto regression techniques. Multivariate Granger causality tests, variance decompositions and impulse response functions are utilized to examine causal relationships among key economic variables. In 1987, the Federal open Market Committee (FOMC) decided not to establish a specific target range for M1 growth . Since then, the broader M2 measure of money has been the preeminent variable used in implementing monetary policy; however, the results indicate that M1 can be used in predicting inflation and M2 can be used in predicting real GDP. This suggests that the FED should have two intermediate targets and indicators instead of one.


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