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The discounted economic stock of money with VAR forecasting

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Author Info
William A. Barnett (U. of Kansas)
Unja Chae (Intel Corporation)
John W. Keating (U. of Kansas)

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Abstract

We measure the economic capital stock of money implied by the Divisia monetary aggregate service flow, in a manner consistent with asset pricing theory. Based on Barnett’s [4] definition of the economic stock of money, we estimate the expected discounted flow of expenditure on the services of monetary assets, where expenditure on monetary services is evaluated at the user costs of the monetary components. We use forecasts based on martingale expectations, asymmetric vector autoregressive expectations, and the Bayesian vector autoregressive expectations. We find the resulting capital-stock index to be surprisingly robust to the modeling of expectations

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Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 51.

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Date of creation: 04 Jul 2006
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Handle: RePEc:sce:scecfa:51

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Related research
Keywords: Monetary aggregation discounted economic capital stock VAR robustness capital asset pricing

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Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models

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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. William Barnett & Unja Chae & John Keating, 2005. "Forecast Design in Monetary Capital Stock Measurement," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200516, University of Kansas, Department of Economics, revised Aug 2005. [Downloadable!]
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  3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  4. Schunk, Donald L, 2001. "The Relative Forecasting Performance of the Divisia and Simple Sum Monetary Aggregates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 272-83, May.
  5. Rotemberg, Julio J & Driscoll, John C & Poterba, James M, 1995. "Money, Output, and Prices: Evidence from a New Monetary Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 67-83, January.
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  6. Thomas Doan & Robert B. Litterman & Christopher A. Sims, 1986. "Forecasting and conditional projection using realistic prior distribution," Staff Report 93, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  7. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149. [Downloadable!] (restricted)
  8. Keating, John W., 2000. "Macroeconomic Modeling with Asymmetric Vector Autoregressions," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 1-28, January. [Downloadable!] (restricted)
  9. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May. [Downloadable!] (restricted)
  10. Hoover, Kevin D. & Perez, Stephen J., 1994. "Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 47-74, August. [Downloadable!] (restricted)
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Cited by:
(explanations, 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, 2006. "Supply of Money," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200607, University of Kansas, Department of Economics. [Downloadable!]
    Other versions:
  2. William Barnett & Unja Chae & John Keating, 2005. "Forecast Design in Monetary Capital Stock Measurement," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200516, University of Kansas, Department of Economics, revised Aug 2005. [Downloadable!]
    Other versions:
  3. Barnett, William & Keating, John & Kelly, Logan, 2007. "Toward a Bias Corrected Currency Equivalent Index," MPRA Paper 4786, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Kelly, Logan J, 2008. "The Currency Equivalent Index and the Current Stock of Money," MPRA Paper 7176, University Library of Munich, Germany. [Downloadable!]
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