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Measuring the Economic Stock of Money

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  • Kelly, Logan

Abstract

Aggregation theoretic measures of the capital stock of money have in the past been criticized for their dependence on future expectations. I attempt to answer some of those objections by using several forecasting methods to generate expectations needed for calculating the economic stock of money. I show that targeted factor model forecasting improves the accuracy of monetary capital stock measurements slightly. However, I also find, as has previous research, that monetary capital stock calculations are robust to assumptions about future expectation. I believe these findings tend to support the conclusion that concerns about the dependency of theoretical monetary stock aggregates on forecasted future expectations have been overstated.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4914.

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Date of creation: 13 Sep 2007
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Handle: RePEc:pra:mprapa:4914

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Keywords: Monetary Aggregation; Money Stoc; ; Economic Stock of Money; Targeted Factor Models;

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  1. Jean Boivin & Serena Ng, 2003. "Are More Data Always Better for Factor Analysis?," NBER Working Papers 9829, National Bureau of Economic Research, Inc.
  2. Jushan Bai & Serena Ng, 2004. "Evaluating Latent and Observed Factors in Macroeconomics and Financ," Econometrics, EconWPA 0408007, EconWPA.
  3. William A Barnett & Unja Chae & John W Keating, 2012. "Forecast Design In Monetary Capital Stock Measurement," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1250005-1-1.
  4. William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005.
  5. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  6. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, Econometric Society, vol. 70(1), pages 191-221, January.
  7. Barnett, William A. & Liu, Yi & Jensen, Mark, 1997. "Capm Risk Adjustment For Exact Aggregation Over Financial Assets," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 1(02), pages 485-512, June.
  8. Elliott, J Walter & Baier, Jerome R, 1979. "Econometric Models and Current Interest Rates: How Well Do They Predict Future Rates?," Journal of Finance, American Finance Association, vol. 34(4), pages 975-86, September.
  9. James H. Stock & Mark W. Watson, 1999. "Forecasting Inflation," NBER Working Papers 7023, National Bureau of Economic Research, Inc.
  10. repec:cup:macdyn:v:1:y:1997:i:2:p:485-512 is not listed on IDEAS
  11. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(2), pages 207-37, April.
  12. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 813-36, July.
  13. Pesando, James E, 1979. "On the Random Walk Characteristics of Short- and Long-Term Interest Rates in an Efficient Market," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 11(4), pages 457-66, November.
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