0
$\begingroup$

when I deflate a series (for specific example, take M1 (M1SL) series from FRED) by CPI, it is not exactly the same as the one the that FRED provides i.e. M1REAL. It seems like M1REAL is a scaled up series with respect to the series obtained by M1/CPI. Any idea, why that is the case? They should exactly be the same.

$\endgroup$
1
  • $\begingroup$ You might want to add some details (what CPI data series used), method / formula applied etc. Otherwise anyone looking at this can just guess what you might be doing. $\endgroup$
    – AKdemy
    Mar 4 at 20:55

1 Answer 1

0
$\begingroup$

FRED's M1REAL variable is the variable M1SL deflated to '82/'84 dollars by the series CPIAUCSL. You are right in understanding this identity.

Dividing M1SL by CPIAUCSL gives a series very close to M1REAL, with a maximum monthly deviation of 0.0498, or just under $50 million (less than 0.000001% of M1 in 01/2024), in the time period from 1980 to 2023. These deviations are either due to rounding of the versions of the variables published on FRED, or to rounding of the variables themselves; the largest deviations between M1REAL and its calculated equivalent occurred during the 1980s, when precision matched the analytical methods employed at the time.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.