Money Still Matters

It’s strange: For many years, the Federal Reserve has conducted monetary policy with little if any reference to the money supply. Fed officials never mention M1 or M2 anymore, and analysts in academia and on Wall Street rarely think about those variables either. In a new NBER Working Paper, we trace out the developments that led to the jettison of money supply measures from monetary policy deliberations, and we offer some reasons why the Fed and Fed watchers might want to pay renewed attention to money.