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U.S. Narrow Money for the Twenty-First Century

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Author Info

  • Donald H. Dutkowsky
  • Barry Z. Cynamon
  • Barry E. Jones

Abstract

This study focuses on sweep programs in establishing conceptually appropriate and reliable measures of narrow money. We propose the aggregates M1RS = M1 + holdings of funds swept in retail sweep programs, and M1S = M1RS + holdings of funds swept in commercial demand deposit sweep programs. Based on quarterly observations from 1959:1--2002:4, cointegration tests indicate the existence of long-run relationships between the velocity of M1S and the corresponding opportunity cost of holding money, using either short-term or long-term interest rates. Tests find weaker evidence for M1RS and little support for MZM. (JEL E41, G21) Copyright 2006, Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 44 (2006)
Issue (Month): 1 (January)
Pages: 142-152

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Handle: RePEc:oup:ecinqu:v:44:y:2006:i:1:p:142-152

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Cited by:
  1. Peter N. Ireland, 2007. "On the Welfare Cost of Inflation and the Recent Behavior of Money Demand," Boston College Working Papers in Economics 662, Boston College Department of Economics.
  2. Dutkowsky, Donald H. & VanHoose, David D., 2013. "Interest on reserves, unregulated interest on demand deposits, and optimal sweeping," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 192-202.
  3. Dutkowsky, Donald H. & VanHoose, David D., 2011. "Interest on bank reserves and optimal sweeping," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2491-2497, September.
  4. Richard G. Anderson & Barry Jones, 2011. "A comprehensive revision of the U.S. monetary services (divisia) indexes," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 325-360.
  5. Rasmus Ruffer & Livio Stracca, 2007. "What is global excess liquidity, and does it matter?," Money Macro and Finance (MMF) Research Group Conference 2006 120, Money Macro and Finance Research Group.
  6. Alessandro Calza & Andrea Zaghini, 2011. "Sectoral money demand and the great disinflation in the US," Temi di discussione (Economic working papers) 785, Bank of Italy, Economic Research and International Relations Area.
  7. Elger, Thomas & Jones, Barry E. & Nilsson, Birger, 2006. "Forecasting with Monetary Aggregates: Recent Evidence for the United States," Journal of Economics and Business, Elsevier, vol. 58(5-6), pages 428-446.
  8. Elger, Thomas & Jones, Barry E., 2008. "Can rejections of weak separability be attributed to random measurement errors in the data?," Economics Letters, Elsevier, vol. 99(1), pages 44-47, April.
  9. Cysne, Rubens Penha, 2008. "A note on "Inflation and Welfare"," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1984-1987, September.
  10. Binner, J.M. & Tino, P. & Tepper, J. & Anderson, R. & Jones, B. & Kendall, G., 2010. "Does money matter in inflation forecasting?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4793-4808.
  11. Barry Z. Cynamon & Donald H. Dutkowsky & Barry E. Jones, 2006. "Redefining the Monetary Agggregates: A Clean Sweep," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 661-672, Fall.

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