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Toward a Bias Corrected Currency Equivalent Index

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Author Info
Barnett, William
Keating, John
Kelly, Logan

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Abstract

Measuring the economic stock of money, defined to be the present value of current and future monetary service flows, is a difficult asset pricing problem, because most monetary assets yield interest. Thus, an interest yielding monetary asset is a joint product: a durable good providing a monetary service flow and a financial asset yielding a return. The currency equilivant index provides an elegant solution, but it does so by making strong assumptions about expectations of future monetary service flows. These assumptions cause the currency equivalent index to exhibit significant downward bias. In this paper, we propose an extension to the currency equivalent index that will correct for a significant amount of this bias.

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File URL: http://mpra.ub.uni-muenchen.de/4786/
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File URL: http://mpra.ub.uni-muenchen.de/5038/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4786.

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Date of creation: 25 Sep 2007
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Handle: RePEc:pra:mprapa:4786

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Related research
Keywords: Currency Equilivant Index Monetary Aggregation Money Stock

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Find related papers by JEL classification:
E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other

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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. William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005. [Downloadable!]
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  2. Barnett, William A. & Liu, Yi & Jensen, Mark, 2005. "Capm Risk Adjustment For Exact Aggregation Over Financial Assets," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 485-512, March. [Downloadable!]
  3. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149. [Downloadable!] (restricted)
  4. William Barnett & Unja Chae & John Keating, 2005. "The Discounted Economic Stock of Money with VAR Forecasting," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200515, University of Kansas, Department of Economics, revised Aug 2005. [Downloadable!]
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  5. repec:cup:macdyn:v:1:y:1997:i:2:p:485-512 is not listed on IDEAS
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