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Redefining the Monetary Agggregates: A Clean Sweep

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Author Info
Barry Z. Cynamon (University of Chicago)
Donald H. Dutkowsky () (Syracuse University)
Barry E. Jones (SUNY Binghamton)

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Abstract

This paper focuses on the role of sweep programs in properly measuring money. We propose new monetary aggregates that adjust the conventional measures to account for the medium of exchange capability of funds in sweep programs. Using data on swept funds in retail and commercial demand deposit (DD) sweep programs, we provide time series of monthly data on the sweep-adjusted money measures. By the twenty-first century, DD sweeps have led to distortion in reported MZM of approximately 3 percent, 5 percent for M2, and 6 percent for M2M. Underreporting of M1 due to retail and DD sweep programs is almost 70 percent.

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File URL: http://college.holycross.edu/eej/Volume32/V32N4P661_672.pdf
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Publisher Info
Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 32 (2006)
Issue (Month): 4 (Fall)
Pages: 661-672
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Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:661-672

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Allan Meltzer, 1998. "Monetarism: The issues and the outcome," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(1), pages 8-31, March. [Downloadable!] (restricted)
  2. Dutkowsky, Donald H & Cynamon, Barry Z, 2003. " Sweep Programs: The Fall of M1 and Rebirth of the Medium of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 263-79, April.
  3. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," International Finance Discussion Papers 761, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  4. Nelson, Edward, 2002. "Direct effects of base money on aggregate demand: theory and evidence," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 687-708, May. [Downloadable!] (restricted)
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  5. Thomas D. Simpson, 1980. "The redefined monetary aggregates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 97-114.
  6. Jones, Barry E. & Dutkowsky, Donald H. & Elger, Thomas, 2005. "Sweep programs and optimal monetary aggregation," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 483-508, February. [Downloadable!] (restricted)
  7. Richard D. Porter & Thomes D. Simpson & Eileen Mauskopf, 1979. "Financial Innovation and the Monetary Aggregates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1979-1), pages 213-230. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. S. Boragan Aruoba & Frank Schorfheide, 2009. "Sticky prices versus monetary frictions: an estimation of policy trade-offs," Working Papers 09-8, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  2. Peter N. Ireland, 2008. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," NBER Working Papers 14098, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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