Follow up to Is the speed stable?Part 26. As of the fourth quarter of 2023 data, the answer is still “no.”
figure 1: M2 speed calculated using GDP (blue), M4 divided speed (tan), both logarithmic, Q1 1990 = 0. NBER-defined recession peak-to-trough dates appear gray. Source: Federal Reserve, BEA, via FRED, chronic fatigue syndromeNBER, and author's calculations.
One might think that a glance at the data is enough, but some readers (well, one has) asserts that experts consider the velocity of circulation to be stable when using the currency Divisia measure. To accommodate these views I added the M4 Divisia speed.
The ADF test applied to the two speed series (in logarithmic form) fails to reject the unit root zero, while the KPSS test applied to the two series rejects the trend stationary zero of 5% msl.
