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Friedman and Divisia Monetary Measures

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  • William Barnett

    (Department of Economics, The University of Kansas; Center for Financial Stability, New York City; IC2 Institute, University of Texas at Austin)

Abstract

This paper explores the relationship between Milton Friedman’s work and the work on Divisia monetary aggregation, originated by William A. Barnett. The paradoxes associated with Milton Friedman’s work are largely resolved by replacing the official simple-sum monetary aggregates with monetary aggregates consistent with economic index number theory, such as Divisia monetary aggregates. Demand function stability becomes no more of a problem for money than for any other good or service. Money becomes relevant to monetary policy in all macroeconomic traditions, including New Keynesian economics, real business cycle theory, and monetarist economics. Research and data on Divisia monetary aggregates are available for over 40 countries throughout the world from the online library within the Center for Financial Stability’s (CFS) program, Advances in Monetary and Financial Measurement. This paper supports adopting the standards of monetary data competency advocated by the CFS and the International Monetary Fund (2008, pp. 183-184).

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File URL: http://www2.ku.edu/~kuwpaper/2013Papers/201312.pdf
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Bibliographic Info

Paper provided by University of Kansas, Department of Economics in its series WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS with number 201312.

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Length: 50 pages
Date of creation: Dec 2013
Date of revision: Dec 2013
Handle: RePEc:kan:wpaper:201312

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Keywords: Divisia monetary aggregates; demand for money; monetarism; index number theory.;

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  24. Cagan, Phillip, 1982. "The Choice among Monetary Aggregates as Targets and Guides for Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 661-86, November.
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  30. repec:clg:wpaper:2013-02 is not listed on IDEAS
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