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Redefining the Monetary Agggregates: A Clean Sweep

  • Barry Z. Cynamon

    (University of Chicago)

  • Donald H. Dutkowsky

    ()

    (Syracuse University)

  • Barry E. Jones

    (SUNY Binghamton)

This paper focuses on the role of sweep programs in properly measuring money. We propose new monetary aggregates that adjust the conventional measures to account for the medium of exchange capability of funds in sweep programs. Using data on swept funds in retail and commercial demand deposit (DD) sweep programs, we provide time series of monthly data on the sweep-adjusted money measures. By the twenty-first century, DD sweeps have led to distortion in reported MZM of approximately 3 percent, 5 percent for M2, and 6 percent for M2M. Underreporting of M1 due to retail and DD sweep programs is almost 70 percent.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume32/V32N4P661_672.pdf
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Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 32 (2006)
Issue (Month): 4 (Fall)
Pages: 661-672

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Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:661-672
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  1. Donald H. Dutkowsky & Barry Z. Cynamon & Barry E. Jones, 2006. "U.S. Narrow Money for the Twenty-First Century," Economic Inquiry, Western Economic Association International, vol. 44(1), pages 142-152, January.
  2. Allan Meltzer, 1998. "Monetarism: The issues and the outcome," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(1), pages 8-31, March.
  3. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting 'M' back in Monetary Policy," NBER Working Papers 9552, National Bureau of Economic Research, Inc.
  4. Thomas D. Simpson, 1980. "The redefined monetary aggregates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Feb, pages 97-114.
  5. Dutkowsky, Donald H & Cynamon, Barry Z, 2003. " Sweep Programs: The Fall of M1 and Rebirth of the Medium of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(2), pages 263-79, April.
  6. Richard D. Porter & Thomes D. Simpson & Eileen Mauskopf, 1979. "Financial Innovation and the Monetary Aggregates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(1), pages 213-230.
  7. Nelson, Edward, 2001. "Direct Effects of Base Money on Aggregate Demand: Theory and Evidence," CEPR Discussion Papers 2666, C.E.P.R. Discussion Papers.
  8. Jones, Barry E. & Dutkowsky, Donald H. & Elger, Thomas, 2005. "Sweep programs and optimal monetary aggregation," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 483-508, February.
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