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Redefining the Monetary Agggregates: A Clean Sweep

Author

Listed:
  • Barry Z. Cynamon

    (University of Chicago)

  • Donald H. Dutkowsky

    () (Syracuse University)

  • Barry E. Jones

    (SUNY Binghamton)

Abstract

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.

Suggested Citation

  • Barry Z. Cynamon & Donald H. Dutkowsky & Barry E. Jones, 2006. "Redefining the Monetary Agggregates: A Clean Sweep," Eastern Economic Journal, Eastern Economic Association, vol. 32(4), pages 661-672, Fall.
  • Handle: RePEc:eej:eeconj:v:32:y:2006:i:4:p:661-672
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume32/V32N4P661_672.pdf
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    References listed on IDEAS

    as
    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. 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 263-279, April.
    3. 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.
    4. Eric M. Leeper & Jennifer E. Roush, 2003. "Putting "M" back in monetary policy," Proceedings, Federal Reserve Bank of Cleveland, pages 1217-1264.
    5. Nelson, Edward, 2002. "Direct effects of base money on aggregate demand: theory and evidence," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 687-708, May.
    6. Allan Meltzer, 1998. "Monetarism: The issues and the outcome," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 8-31, March.
    7. 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.
    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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