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Constructing Divisia Monetary Aggregates for the Asian Tigers

Author

Listed:
  • William A. Barnett

    (Department of Economics, University of Kansas, Lawrence, KS 66045, USA and Center for Financial Stability, New York City)

  • JoonSoo Lee

    (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)

  • Naowar Mohiuddin

    (Department of Economics, University of Kansas, Lawrence, KS 66045, USA)

Abstract

This study constructs Divisia monetary aggregates for the "Asian Tigers"—Hong Kong (1999-2024), South Korea (2009-2024), Singapore (1991-2021), and Taiwan (2005-2024)—and assesses whether Divisia monetary aggregates explain nominal GDP better than simple-sum money. Our findings demonstrate that Divisia indices respond more sensitively to economic shocks. For Hong Kong and Taiwan, narrow Divisia money provides the best explanations for fluctuations in nominal GDP. Our results suggest that Divisia monetary aggregates can be beneficial for monetary policy analysis in these countries and underscore the importance of further research into the empirical performance of Divisia monetary aggregates in macroeconomic prediction.

Suggested Citation

  • William A. Barnett & JoonSoo Lee & Naowar Mohiuddin, 2024. "Constructing Divisia Monetary Aggregates for the Asian Tigers," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 202413, University of Kansas, Department of Economics.
    • Handle: RePEc:kan:wpaper:202413
    as

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    File URL: https://kuwpaper.ku.edu/2024Papers/202413.pdf
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    References listed on IDEAS

    as
    1. William A. Barnett & Van H. Nguyen, 2021. "Constructing Divisia Monetary Aggregates for Singapore," JRFM, MDPI, vol. 14(8), pages 1-15, August.
    2. Hendrickson, Joshua R., 2014. "Redundancy Or Mismeasurement? A Reappraisal Of Money," Macroeconomic Dynamics, Cambridge University Press, vol. 18(7), pages 1437-1465, October.
    3. Benchimol, Jonathan, 2016. "Money and monetary policy in Israel during the last decade," Journal of Policy Modeling, Elsevier, vol. 38(1), pages 103-124.
    4. Michael T. Belongia & Peter N. Ireland, 2022. "Strengthening the second pillar: a greater role for money in the ECB’s strategy," Applied Economics, Taylor & Francis Journals, vol. 54(1), pages 99-114, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    divisia index; divisia monetary aggregates; vector error-correction model;
    All these keywords.

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