Scott Sumner writes down another information equilibrium model
NGDP = MB*(Base velocity), where V is positively related to nominal interest rates.
Hey, that's a pretty good model. Where have I seen this before ...
Let's write down a pair of information equilibrium relationships
V : NGDP ⇄ MB
i ⇄ V
So that in general equilibrium we have:
V = k NGDP/MB
log i = α log V
Or more compactly:
log i = α log NGDP/MB + β
with α = 3.6 and β = α log k = 9.1. Here's a graph:
This has the added bonuses of using numerical values, showing explicit functional forms, and being fit to actual data (in this case from 2000 to the present).
Quantitative analysis: ask for it by name!