The Meaning of Monetary Indicators

Among the topics that monetary economists discuss, few have been debated as much or as long as the meaning of a given change or rate of change in the stock of money or the interest rate. Some have stressed the importance of monetary or of interest rate changes as a guide to the future pace of economic activity. Yet it seems reasonable to conclude that the partisans have not succeeded in convincing others that one or the other of these variables is the most reliable measure of the effect of monetary policy. There is not even agreement that the choice is restricted to these two measures. Bank credit, free reserves, liquid assets, and other variables are mentioned frequently. Since it is not unusual to find that quite different—even opposite—conclusions are suggested by the various measures, a comparison of the information provided by some of the variables proposed as indicators is called for.