A Revealed Preference Analysis of Friedman and Schwartz Money
In their seminal series of books Friedman and Schwartz concluded that the appropriate assets to aggregate into money are currency, demand deposits and time deposits issued by commercial banks. For this paper I used revealed preference analysis to test the validity of this conclusion. I find that these financial assets pass tests for the existence of a monetary aggregate consistent with the economic theory of aggregation over goods. For a short period after World War II, the data are consistent with a more broadly defined monetary aggregate. A reputable index number like the Divisia index must be employed to form these assets into an aggregate consistent with the economic theory of aggregation. Copyright 1995 by Ohio State University Press.
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Volume (Year): 27 (1995)
Issue (Month): 1 (February)
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