An Update on Velocity Behavior

Last November [1986] I prepared a rather lengthy paper for the Carnegie-Rochester Public Policy Conference on the behavior of velocity and the stability of Ml money demand functions. This report updates that research in three ways. First, I will derive an alternative interpretation of the short-run money demand functions that appear in the November paper.Second, I will present the new regression results from a covariance analysis of short-run money demand specifications for three distinct subsamples of the 1953-85 sample. Third, I will present an analysis of the behavior of Ml velocity during the first 10 months of 1986