One explanation for the unusually slow growth of M2 is that people shifted from bank deposits to higher yielding bond mutual funds. This possibility raises the question of whether the addition of bond funds to M2 would give policymakers a more accurate view of what is happening in the economy....

Laubach and Williams (2003) employ a Kalman filter approach to jointly estimate the neutral real federal funds rate and trend output growth using an IS relationship and an output gap based inflation equation. They find a positive link between these two variables, but also much error surrounding...