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A Revealed Preference Analysis of Friedman and Schwartz Money

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  • Swofford, James L

Abstract

In their seminal series of books Friedman and Schwartz concluded that the appropriate assets to aggregate into money are currency, demand deposits and time deposits issued by commercial banks. For this paper I used revealed preference analysis to test the validity of this conclusion. I find that these financial assets pass tests for the existence of a monetary aggregate consistent with the economic theory of aggregation over goods. For a short period after World War II, the data are consistent with a more broadly defined monetary aggregate. A reputable index number like the Divisia index must be employed to form these assets into an aggregate consistent with the economic theory of aggregation. Copyright 1995 by Ohio State University Press.

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  • Swofford, James L, 1995. "A Revealed Preference Analysis of Friedman and Schwartz Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 154-164, February.
    • Handle: RePEc:mcb:jmoncb:v:27:y:1995:i:1:p:154-64
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    Cited by:

    1. william, barnett, 2013. "Friedman and Divisia Monetary Measures," MPRA Paper 52310, University Library of Munich, Germany.
    2. Pérez-Blanco, C. D & Standardi, G., 2019. "Farm waters run deep: a coupled positive multi-attribute utility programming and computable general equilibrium model to assess the economy-wide impacts of water buyback," Agricultural Water Management, Elsevier, vol. 213(C), pages 336-351.
    3. Geoffrey K. Turnbull & Michael T. Tasto, 2008. "Independent Cities and Counties in Virginia: Substitute Jurisdictions?," Urban Studies, Urban Studies Journal Limited, vol. 45(1), pages 53-66, January.
    4. William A. Barnett, 2000. "Which Road Leads to Stable Money Demand?," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 577-592, Emerald Group Publishing Limited.
    5. Anderson, Richard G. & Duca, John V. & Fleissig, Adrian R. & Jones, Barry E., 2019. "New monetary services (Divisia) indexes for the post-war U.S," Journal of Financial Stability, Elsevier, vol. 42(C), pages 3-17.
    6. Scharnagl, Michael, 1996. "Monetary aggregates with special reference to structural changes in the financial markets," Discussion Paper Series 1: Economic Studies 1996,02e, Deutsche Bundesbank.

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