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Where simple sum and Divisia monetary aggregates part: illustrations and evidence for the United States

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  • Belongia, Michael

Abstract

Empirical studies of money continue to use the Federal Reserve's official simple sum indexes, apparently in the belief that their behavior differs little from patterns exhibited by superlative indexes of money. This paper illustrates specific periods when this assumption is refuted and offers explanations for why simple sum and superlative indexes of money are likely to move differently at economic turning points.

Suggested Citation

  • Belongia, Michael, 2005. "Where simple sum and Divisia monetary aggregates part: illustrations and evidence for the United States," MPRA Paper 18969, University Library of Munich, Germany, revised Mar 2005.
    • Handle: RePEc:pra:mprapa:18969
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    File URL: https://mpra.ub.uni-muenchen.de/18969/1/MPRA_paper_18969.pdf
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    References listed on IDEAS

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    1. Kenneth A. Kavajecz, 1994. "The evolution of the Federal Reserve's monetary aggregates: a timeline," Proceedings, Federal Reserve Bank of St. Louis, issue Mar, pages 32-66.
    2. Swofford, James L & Whitney, Gerald A, 1987. "Nonparametric Tests of Utility Maximization and Weak Separability for Consumption, Leisure and Money," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 458-464, August.
    3. William A. Barnett & Yi Liu, 2000. "Beyond the Risk-neutral Utility Function," Palgrave Macmillan Books, in: Michael T. Belongia & Jane M. Binner (ed.), Divisia Monetary Aggregates, chapter 1, pages 11-27, Palgrave Macmillan.
    4. Carl F. Christ, 1993. "Assessing applied econometric results," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 71-94.
    5. Michael T. Belongia & Jane M. Binner (ed.), 2000. "Divisia Monetary Aggregates," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28823-2, October.
    6. Rotemberg, Julio J & Driscoll, John C & Poterba, James M, 1995. "Money, Output, and Prices: Evidence from a New Monetary Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 67-83, January.
    7. Kenneth A. Kavajecz, 1994. "The evolution of the Federal Reserve's monetary aggregates: a timeline," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 32-66.
    8. Michael T. Belongia, 2000. "Consequences of Money Stock Mismeasurement: Evidence from Three Countries," Palgrave Macmillan Books, in: Michael T. Belongia & Jane M. Binner (ed.), Divisia Monetary Aggregates, chapter 13, pages 292-312, Palgrave Macmillan.
    9. Richard G. Anderson & Barry E. Jones & Travis D. Nesmith, 1997. "Special report: The monetary services index project of the Federal Reserve Bank of St. Louis: monetary aggregation theory and statistical index numbers," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 31-52.
    10. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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    Cited by:

    1. William Barnett & Jia Liu & Ryan Mattson & Jeff Noort, 2013. "The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources," Open Economies Review, Springer, vol. 24(1), pages 101-124, February.
    2. Hendrickson, Joshua R., 2014. "Redundancy Or Mismeasurement? A Reappraisal Of Money," Macroeconomic Dynamics, Cambridge University Press, vol. 18(7), pages 1437-1465, October.

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    More about this item

    Keywords

    Divisia monetary aggregates; index number problems;

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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