Deterioration in the link between M2 and GDP, along with large prediction errors, led the Federal Reserve to downgrade M2 as a reliable indicator in 1993. We argue that the financial condition of depository institutions was a major factor behind this unusual pattern of M2 growth. When...

This study investigates the anomalous relationship between real stock returns and inflation. Specifically, we investigate hypotheses that claim the proxy relationship between inflation and expected real output is driven by the practice of debt monetization and/or countercyclical monetary policy...