12 May 2017


Lara-Murphy Show, Potpourri 5 Comments

==> In Part 1 of our interview with Nelson Nash, Carlos and I focus on faith, family, and forestry. But Nelson also talks about his relationship with Leonard Read, so check it out.

==> Joe Salerno explains that a new econometric paper criticizes Friedman and Schwartz’s famous studies. I haven’t studied the original paper, I’m curious for other reactions.

==> The respectful von Pepe sends this obituary of Carl Christ.

==> I think the respectful von Pepe also sent me this obituary of Allan Meltzer.

5 Responses to “Potpourri”

  1. Andrew_FL says:

    Salerno ought perhaps curb his enthusiasm. It appears that the main difference in velocity estimates is a constant exponential trend difference before 1903. This has no bearing whatsoever on the claim of Friedman and Schwartz that business cycle-as opposed to trend-fluctuations in nominal GDP were primarily caused by fluctuations in money supply rather than money demand.

    • Bob Murphy says:

      Are you sure Andrew_Fl? In addition to the long-term smoothing (due to more financial sophistication etc.), I think there was a separate category of smoothing over the stages of the business cycle. I could be wrong, but I got the sense that there were two types of smoothing going on.

      • Andrew_FL says:

        As I see it, Friedman and Schwartz made two major claims in their work:

        1. Short run fluctuations in NGDP are primarily caused by fluctuations in the money supply, historically. This is true even if we take the raw velocity figures

        2. What short run fluctuations in money demand there are can be modeled well as a function of a relatively small number of variables

        If I understand correctly, the other “smoothing” concerns the statistical fit to the raw data. This new paper claims their model is not statistically significantly better than a random walk model for the same velocity data, when the trend adjustment is not done

        1 is typically regarded as the most important claim they made. The official Velocity data corresponds to the black and (before 1903) red curves in Salerno’s figure taken from this new paper. 2 is an ancillary claim. This statistical analysis does call it into question but I don’t think most people would regard it as detracting from point 1.

        In any case the theoretical arguments for monetarism do not necessarily rest on the historical stability of velocity, but rather on the analytical approach of the equation of exchange. Rather, Friedman’s argument for targeting monetary aggregates rested on the historical stability of velocity. Most monetarists no longer advocate money supply targeting per se, and given institutional changes Friedman probably wouldn’t either.

    • Toby says:

      I’m surprised that Salerno would like Hendry’s approach.

  2. Tel says:

    Speech in the Australian Commonwealth Senate recently…


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