Interest Rate Forecasting: An Eclectic Model Approach

The author proceeds from a discussion of possible velocity and GNP growth patterns to a newly constructed money demand equation. A gradual rise in Treasury bill rates of approximately 125 basis points emerges in the "control" solution — combining the series of events assumed most likely to occur — and alternative outcomes are explored as underlying assumptions change. The alternative elasticities presented are important in understanding and predicting the demand for money as economic growth proceeds.