Measuring Money Growth When Financial Markets are Changing
AbstractThis article considers constructing monetary aggregates in the presence of financial market innovations and changes in the relationship between individual assets and output. We propose two procedures for constructing a monetary aggregate with the objective of providing a reliable monetary leading indicator of nominal GDP. In the first, subaggregates discretely switch in and out; in the second, the aggregate's growth is a time-varying weighted average of the growth of the subaggregates, where the weights follow a multivariate random walk. These procedures are used to examine augmenting M2 with stock and/or bond mutual funds. The alternative aggregates are broadly similar to M2, but during 1992â€“1993 they outperform M2.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 2799053.
Date of creation: 1996
Date of revision:
Publication status: Published in Journal of Monetary Economics
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.:
- Barnett, William A., 1980. "Economic monetary aggregates an application of index number and aggregation theory," Journal of Econometrics, Elsevier, Elsevier, vol. 14(1), pages 11-48, September.
- Barnett, William A & Fisher, Douglas & Serletis, Apostolos, 1992. "Consumer Theory and the Demand for Money," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2086-2119, December.
- Martin Feldstein, 1992. "The Recent Failure of U.S. Monetary Policy," NBER Working Papers 4236, National Bureau of Economic Research, Inc.
- Cooley, Thomas F & Prescott, Edward C, 1973. "Tests of an Adaptive Regression Model," The Review of Economics and Statistics, MIT Press, vol. 55(2), pages 248-56, May.
- Alexander H. Sarris, 1973. "A Bayesian Approach To Estimation Of Time-Varying Regression Coefficients," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 2, number 4, pages 497-520 National Bureau of Economic Research, Inc.
- Cooley, Thomas F & Prescott, Edward C, 1973. "An Adaptive Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 364-71, June.
- Cooley, Thomas F & Prescott, Edward C, 1976. "Estimation in the Presence of Stochastic Parameter Variation," Econometrica, Econometric Society, Econometric Society, vol. 44(1), pages 167-84, January.
- John V. Duca, 1993. "Should bond funds be included in M2?," Research Paper, Federal Reserve Bank of Dallas 9321, Federal Reserve Bank of Dallas.
- Lance J. Bachmeier & Norman R. Swanson, 2003.
"Predicting Inflation: Does The Quantity Theory Help?,"
Departmental Working Papers, Rutgers University, Department of Economics
200317, Rutgers University, Department of Economics.
- Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 43(3), pages 570-585, July.
- Dai, Meixing, 2009.
"On the role of money growth targeting under inflation targeting regime,"
13780, University Library of Munich, Germany.
- Meixing DAI, 2009. "On the role of money growth targeting under inflation targeting regime," Working Papers of BETA 2009-11, Bureau d'Economie ThÃ©orique et AppliquÃ©e, UDS, Strasbourg.
- Barnett, William A, 1997.
"Which Road Leads to Stable Money Demand?,"
Economic Journal, Royal Economic Society,
Royal Economic Society, vol. 107(443), pages 1171-85, July.
- John B. Carlson & Dennis L. Hoffman & Benjamin D. Keen & Robert H. Rasche, 1999.
"Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates,"
9917, Federal Reserve Bank of Cleveland.
- Carlson, John B. & Hoffman, Dennis L. & Keen, Benjamin D. & Rasche, Robert H., 2000. "Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates," Journal of Monetary Economics, Elsevier, Elsevier, vol. 46(2), pages 345-383, October.
- Leigh Drake & Adrian Fleissig, 2004. "Admissible Monetary Aggregates and UK Inflation Targeting," Money Macro and Finance (MMF) Research Group Conference 2004, Money Macro and Finance Research Group 2, Money Macro and Finance Research Group.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ben Steinberg).
If references are entirely missing, you can add them using this form.