<p>So long as the growth rate of the monetary base is greater than the growth rate of M2, the ratio of M2 over the base (velocity) will decrease. (The numerator of M2/MB is growing less slowly than the denominator.)</p>

<p>That is what happened during (most of) the period shown. It was only in 1996 that M2 was growing faster than the base, which would increase velocity.</p>

<p>Your question is effectively attempting to characterise the second time derivative (acceleration) of M2 in terms of the acceleration of the monetary base and velocity. <a href="https://economics.stackexchange.com/questions/17677/other-factors-that-affect-the-supply-of-money/17687#17687">In my answer to another question, I give the relationship for acceleration in the money supply, and it is related to the acceleration in the monetary base and the acceleration of velocity.</a> The data shows the <em>level</em> of velocity, which is not enough to characterise the relationship.</p>

CC BY-SA 3.0
2017-08-02T11:32:51.140Z
2017-08-03T13:12:08.223Z
2017-08-03T13:12:08.223Z
Brian Romanchuk
<p>Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still progressively sped up. How is this possible?</p>

<p><img src="https://i.sstatic.net/o11JC.jpg" alt="enter image description here"></p>

<p><img src="https://i.sstatic.net/QujhK.jpg" alt="enter image description here"></p>

<p><img src="https://i.sstatic.net/mET2z.jpg" alt="enter image description here"></p>

<p>Reference to second graph:</p>

<p><a href="https://www.alt-m.org/2016/07/21/why-the-money-multiplier-remains-so-low/" rel="nofollow noreferrer">https://www.alt-m.org/2016/07/21/why-the-money-multiplier-remains-so-low/</a></p>

<monetary-policy><money-supply><federal-reserve>
Why did the rate of money supply growth accelerate from 1993-96 in the United States?
user14013
# Why did the rate of money supply growth accelerate from 1993-96 in the United States?

(Asked by: username_0 on 2017-08-02)

Even though the rate of growth in the monetary base decelerated — and the money multiplier decreased for the most part — from 1993-96 in the United States, the growth rate of the M2 money stock still progressively sped up. How is this possible?

![enter image description here](https://i.sstatic.net/o11JC.jpg)

![enter image description here](https://i.sstatic.net/QujhK.jpg)

![enter image description here](https://i.sstatic.net/mET2z.jpg)

Reference to second graph:

<https://www.alt-m.org/2016/07/21/why-the-money-multiplier-remains-so-low/>

**Tags:** monetary-policy, money-supply, federal-reserve

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## 1 answers

### Answer by username_1 on 2017-08-02. Score: 0 | Accepted answer

So long as the growth rate of the monetary base is greater than the growth rate of M2, the ratio of M2 over the base (velocity) will decrease. (The numerator of M2/MB is growing less slowly than the denominator.)

That is what happened during (most of) the period shown. It was only in 1996 that M2 was growing faster than the base, which would increase velocity.

Your question is effectively attempting to characterise the second time derivative (acceleration) of M2 in terms of the acceleration of the monetary base and velocity. [In my answer to another question, I give the relationship for acceleration in the money supply, and it is related to the acceleration in the monetary base and the acceleration of velocity.](https://economics.stackexchange.com/questions/17677/other-factors-that-affect-the-supply-of-money/17687#17687) The data shows the *level* of velocity, which is not enough to characterise the relationship.


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