During the past few years, there has been increasing criticism of the forecast performance of the small reduced-form model of the economy. During the same period, several unusual economic developments led to the formulation of new hypotheses and questions concerning the reliability of old ones....

This paper examines several specification errors in the M2-based P* model and develops an M1-based estimate of this model. The apparent statistical significance of M2 is shown to arise from a spurious regression that uses a non-stationary regressor and because the significance test for M2 is...

In the P-star model the price level is determined by the money stock per unit of potential output and the long-run equilibrium level of the velocity of money. This article applies this model to Austria. Problems in identifying permanent shocks to potential output and/or velocity lead to the...