Re: Discontinuance of M3 - Hang On
boddi satva wrote:
So if part of the Fed’s mandate is to concentrate on growing monetary and credit aggregates, why not keep looking at M3?
Because it tells you next to nothing. The best way to predict GDP is with last quarter’s GDP; adding M3 (or M1 or M2) to the equation barely improves the accuracy. And the correlations between M growth and GDP growth are strictly nominal - no one could ever tell you how the influence breaks down into volume vs. price effects.
Doug