Velocity of Money and Productivity Growth: Explaining the 2% Inflation Target in the U.S. (1959–2007)†
Round 1
Reviewer 1 Report
Comments and Suggestions for Authors
Comments:
The paper – “Velocity of Money and Productivity Growth: Explaining the 2% 2 Inflation Target in the U.S. (1959–2007)” is an interesting and timely study extending the current body of literature, however I have few concerns which can and should be addressed by the authors to clarify the contributions and narrative of the paper.
Major comments:
1. Your introduction effectively outlines the main focus and purpose of your study, which is great. However, it would be beneficial to provide a bit more context regarding the current state of Inflation in USA, perhaps including some key statistics or recent trends to set the stage for your research."
2. Clarify the link between innovations and transactional cost savings. How specifically do innovations lead to cost savings compared to barter? Providing a clearer explanation or illustrative examples could enhance understanding.
3. Elaborate on how labor productivity growth and interest rates interact to determine the optimal velocity of money. Providing a more detailed explanation of this relationship and its impact on the model's outcomes would strengthen the analysis.
4. Provide more information on the methodology used to support the model for the U.S. testing aggregates (M1, M1RS, and M1S) from 1959-2007. Detailing the empirical methods, data sources, and any limitations in the analysis would improve the study's credibility.
5. Explain the rationale behind setting the inflation target rate equal to the growth rate of velocity, leading to an inflation rate near 2%. What are the implications of this choice, and how does it align with economic theory or empirical evidence? Consider expanding on the discussion of the Friedman (1960) k% rule and how it relates to preventing deflations.
6. Providing more context or empirical examples to support this assertion would enhance the discussion's depth. When mentioning the derivation of a long-term Taylor (1993) type rule, offer a bit more explanation or detail about its significance, application, or implications within the context of the study's findings.
Author Response
Please see attachment
Author Response File: 
Author Response.pdf
Reviewer 2 Report
Comments and Suggestions for Authors
Please refer to the attached file for my comments.
Comments for author File: Comments.pdf
Comments on the Quality of English Language
English exposition is generally ok, with only minor typos to be fixed.
Author Response
Please see attachment
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
Comments and Suggestions for Authors
Accept
Comments on the Quality of English Language
Accept
