A COINTEGRATION ANALYSIS OF THE US MONEY SUPPLY PROCESS

The elements of the U.S. M1 money supply process are examined for coin tegration and error correction for the subperiods of differing Federal Reserve operating procedures from 1971 through 1990. Cointegration am ong the money supply, the monetary base, and the market-deposit intere st rate differential is observed from 1953:01 to 1990:06 during the bo rrowed reserves operating procedure period. Movements in the interest differential, which possibly affected the currency-deposit ratio compo nent of the money multiplier, and in the money supply, maintained the long-run equilibrium relationship among the series.