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The current stock of money: an aggregation theoretic measure of narrowly defined money

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  • Logan Kelly

Abstract

While the usual definition of narrowly defined money is in terms of grouping of assets to be included in the aggregate, the Current Stock of Money (CSM) focuses on the function of those assets. By isolating the portion of each monetary asset that functions as currency, the CSM measures the amount of currency needed to provide an equal level of monetary service to that of the current monetary portfolio. This makes the CSM suitable for use in any model that contains currency, that is, narrowly defined money. Thus, the main contributions of this research are to derive the CSM and to show that the Currency Equivalent (CE) index is an unbiased measure of the CSM.

Suggested Citation

  • Logan Kelly, 2011. "The current stock of money: an aggregation theoretic measure of narrowly defined money," Applied Economics Letters, Taylor & Francis Journals, vol. 18(7), pages 659-664.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:7:p:659-664
    DOI: 10.1080/13504851003800778
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    References listed on IDEAS

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    1. Bai, Jushan & Ng, Serena, 2008. "Forecasting economic time series using targeted predictors," Journal of Econometrics, Elsevier, vol. 146(2), pages 304-317, October.
    2. 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.
    3. William A. Barnett, 2000. "The User Cost of Money," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 6-10, Emerald Group Publishing Limited.
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    1. Kelly, Logan J. & Barnett, William A. & Keating, John W., 2011. "Rethinking the liquidity puzzle: Application of a new measure of the economic money stock," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 768-774, April.
    2. Sunil Paul & M. Ramachandran, 2013. "Do Currency Equivalent Monetary Aggregates Have an Edge over Their Simple Sum Counterparts?," South Asian Journal of Macroeconomics and Public Finance, , vol. 2(2), pages 107-143, December.

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