BEHAR, ANDREA

Because of the interdependent relationship existing between economic units
in society, the money supply and macroeconomic factors, a need to identify
a concept of money best able to explain and predict likely responses of
economic units to changes in economic variables arises. Such an identification
is important to the Federal Reserve which bears responsibility for formulating and implementing monetary policy. The issue of identifying a relevant
definition of money and a detailed review of previous analyses attempting
to define the best concept of money empirically is discussed herein,
along with the results from a test using Box-Jenkins techniques on several
money concepts and income. This time series study reinforces contentions
that changing relationships between money and near monies and new developments
in regulations governing financial institutions have rendered the
existing monetary aggregates less useful as devices for gathering information
about the economy and as tools in conducting monetary policy.