Question
In this problem, we will investigate the velocity of money in the data. Download quarterly data on the money supply and nominal GDP for the
In this problem, we will investigate the velocity of money in the data. Download quarterly data on the money supply and nominal GDP for the period 1981-2020 (end of 2nd quarter). Define the money supply as M2. You can get this from the St. Louis Fed Fred website. Simply go to the website, type "M2" into the search box, and it'll be the first hit. While downloading data, you will want to click down to go to "quarterly" using "average" as the "aggregation method". To get the GDP data just type "GDP" into the search box. You'll want to make sure that you've downloaded "Gross Domestic Product" not "Real Gross Domestic Product." After you have downloaded these series, define log velocity as log nominal GDP minus the log money supply. Produce a plot of log velocity over the time period.
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