Divisia Monetary Aggregates, the Great Ratios, and Classical Money Demand Functions
King, Plosser, Stock, and Watson (1991) evaluate the empirical relevance of a class of real business cycle models with permanent productivity shocks by analyzing the stochastic trend properties of postwar U.S. macroeconomic data. They fiÂ…nd a common stochastic trend in a three variable system that includes output, consumption, and investment, but the explanatory power of the common trend drops signiÂ…ficantly when they add money balances and the nominal interest rate. In this paper we revisit the cointegration tests in the spirit of King et al. (1991), using improved monetary aggregates whose construction has been stimulated by the Barnett critique. We show that previous rejections of the balanced-growth hypothesis and classical money demand functions can be attributed to mis-measurement of the monetary aggregate.
|Date of creation:|
|Contact details of provider:|| Postal: 2500 University Drive N.W., Calgary, Alberta, T2N 1N4|
Phone: (403) 220-5857
Fax: (403) 282-5262
Web page: http://econ.ucalgary.ca/
More information through EDIRC
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.:
- Serletis, Apostolos, 1987. "The demand for divisia M1, M2, and M3 in the United States," Journal of Macroeconomics, Elsevier, vol. 9(4), pages 567-591.
- Belongia, Michael T. & Ireland, Peter N., 2014.
"The Barnett critique after three decades: A New Keynesian analysis,"
Journal of Econometrics,
Elsevier, vol. 183(1), pages 5-21.
- Michael T. Belongia & Peter N. Ireland, 2012. "The Barnett Critique After Three Decades: A New Keynesian Analysis," NBER Working Papers 17885, National Bureau of Economic Research, Inc.
- Michael T. Belongia & Peter N. Ireland, 2010. "The Barnett Critique After Three Decades: A New Keynesian Analysis," Boston College Working Papers in Economics 736, Boston College Department of Economics.
- Max Gillman & Anton Nakov, 2003. "A Revised Tobin Effect from Inflation: Relative Input Price and Capital Ratio Realignments, USA and UK, 1959-1999," Economica, London School of Economics and Political Science, vol. 70(279), pages 439-450, 08.
- William Barnett & Jia Liu & Ryan Mattson & Jeff van den Noort, 2012.
"The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources,"
WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS
201208, University of Kansas, Department of Economics, revised May 2012.
- Barnett, William A. & Liu, Jia & Mattson, Ryan S. & van den Noort, Jeff, 2012. "The new CFS Divisia monetary aggregates: design, construction, and data sources," MPRA Paper 38905, University Library of Munich, Germany.
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
- Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992.
"Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?,"
Journal of Econometrics,
Elsevier, vol. 54(1-3), pages 159-178.
- Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
- Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
- Max Gillman & Michal Kejak, 2009.
"Inflation, Investment and Growth: a Money and Banking Approach,"
IEHAS Discussion Papers
0911, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Max Gillman & Michal Kejak, 2011. "Inflation, Investment and Growth: a Money and Banking Approach," Economica, London School of Economics and Political Science, vol. 78(310), pages 260-282, 04.
- Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
- Richard G. Anderson & Barry E. Jones, 2011. "A comprehensive revision of the U.S. monetary services (divisia) indexes," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 325-360.
- Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996.
"Efficient Tests for an Autoregressive Unit Root,"
Econometric Society, vol. 64(4), pages 813-836, July.
- Tom Doan, "undated". "ERSTEST: RATS procedure to perform Elliott-Rothenberg-Stock unit root tests," Statistical Software Components RTS00066, Boston College Department of Economics.
- Tom Doan, "undated". "GLSDETREND: RATS procedure to perform local to unity GLS detrending," Statistical Software Components RTS00077, Boston College Department of Economics.
- Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
- K. Alec Chrystal & Ronald MacDonald, 1994.
"Empirical evidence on the recent behavior and usefulness of simple-sum and weighted measures of the money stock,"
Federal Reserve Bank of St. Louis, issue Mar, pages 73-109.
- K. Alec Chrystal & Ronald MacDonald, 1994. "Empirical evidence on the recent behavior and usefulness of simple-sum and weighted measures of the money stock," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 73-109.
- Barnett, William A, 1982. "The Optimal Level of Monetary Aggregation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 14(4), pages 687-710, November.
- Barnett, William A., 1980. "Economic monetary aggregates an application of index number and aggregation theory," Journal of Econometrics, Elsevier, vol. 14(1), pages 11-48, September.
- Apostolos Serletis & Khandokar Istiak & Periklis Gogas, 2013. "Interest Rates, Leverage, and Money," Open Economies Review, Springer, vol. 24(1), pages 51-78, February.
When requesting a correction, please mention this item's handle: RePEc:clg:wpaper:2013-02. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (May Ives)
If references are entirely missing, you can add them using this form.