Quick Summary

To access Money.xls, visit

Money.xls explains how to use the FRED Excel add-in to examine a variety of measures of the money supply and explore their relationship with inflation. Money.xls contains a Hodrick–Prescott (HP) filter function to separate trend from cycle in macro aggregates. The workbook also has data from the International Financial Statistics (IFS) on a subset of countries from which seigniorage rates can be computed. The screencasts show how to download and examine data on interest rates (including the Fisher effect) and exchange rates.

Screencasts

1. • http://vimeo.com/econexcel/moneyinflation: downloads various monetary aggregates (M1, M2, and MZM) and tries (and fails) to show how inflation depends on the money supply (including a ten-year moving average)

2. • http://vimeo.com/econexcel/moneymsi: covers the rather advanced topic of Divisia monetary services indexes (MSI)

3. • http://vimeo.com/econexcel/moneyseigniorage: downloads data on base money and nominal GDP to compute seigniorage rates; has data from IFS for a small subset of countries

4. • http://vimeo.com/econexcel/moneyfftaylor: explains how the Taylor Rule versus the federal funds rate offers a window into how the Fed views the economy; evaluates the tenures of Fed chairs since 1970

5. • http://vimeo.com/econexcel/moneyfisher: downloads data on interest and inflation rates, showing that they move roughly together, and then explains the relationship via the Fisher Effect

6. • http://vimeo.com/econexcel/moneyxrates: downloads data on real effective exchange rates produced by the Fed and the OECD; looks at the trade share weights for the United States and comments on the relationship between money supply and exchange rates

7. • http://vimeo.com/econexcel/moneyhpfilter: shows how to use the HP array function in Excel to separate a variable into its trend and cyclical components using the Hodrick–Prescott algorithm

Introduction

As with GDP, unemployment, and inflation, the primary focus of this section is on awareness of historical trends and current economic conditions with respect to money, interest rates, and exchange rates. The task is complicated by the fact that the money supply is not easily measured, and a core theoretical result, that inflation depends on the rate of change of the money supply, is difficult to show with data.