Where is the Mystery in the Behavior of the Monetary Aggregates?

This position paper is divided into three parts. In the first part an analysis is present indicating the extent to which various forces have affected the growth of M1 since last November. (At the time of this writing August data are not yet available. I expect that the analysis can be updated to include August data by the time the Committee meets.) In the second part the forecasts of the money multiplier that were presented at the meeting of the Committee last March, and forecasts which have been made tan a regular basis since that meeting are reviewed to determine the extent that the growth of M1 that has been observed was predictable. The absence of large ex-ante forecast errors casts considerable doubt on the "special circumstances" hypothesis. Finally, the third section presents our current forecasts for the behavior of the M1-Adjusted Monetary Base Multiplier into early 1985.