Recent Behavior of the M1- Adjusted Monetary Base Multiplier and Forecasts for Early 1984

Since the last meeting of this committee, we have been experimenting with a different presentation of our forecasts of the MI - Adjusted Monetary Base Multiplier. In the past we have always constructed forecasts directly from the forecasts of the various component ratios, which come out of the ARIMA models that we have estimated. These forecasts are not seasonally adjusted, so comparisons over time horizons shorter than one year are difficult to interpret. Our revised presentation allows us to compute forecasts on a seasonally adjusted basis that are not contaminated by errors in forecasting seasonal factors. The presentations employ the known seasonal factors that are published in the Federal Reserve Bulletin for the various components of the monetary aggregates and the seasonal factors constructed each year for the Adjusted Monetary Base by the Federal Reserve Bank of St. Louis. The exact formulas that are employed to construct a seasonally adjusted forecast of the multiplier from the not seasonally adjusted forecasts of the component ratios are indicated in the note attached to this report.