Aggregation-theoretic monetary aggregation over the euro area, when countries are heterogeneous
We derive fundamental new theory for measuring monetary service flows aggregated over countries within the European Monetary Union (EMU). We develop three increasingly restrictive approaches: (1) the heterogeneous agents approach, (2) the multilateral representative agent approach, and (3) the unilateral representative agent approach. Our heterogeneous agents approach contains our multilateral representative agent approach as a special case. In our most general approach, we assume the existence of a representative consumer within each country to aggregate within each country. We use a stochastic approach to aggregation across countries over the heterogeneous representative agents, and we derive the resulting formulas for stochastic aggregation over countries. Our theory permits monitoring the effects of policy at the aggregate level over the euro area, while also monitoring the distribution effects of policy among the countries of the euro area. Our approach requires the simultaneous use of two inflation indexes over the euro area. JEL Classification: C43, C82, E41, E51, F31
|Date of creation:||Sep 2003|
|Contact details of provider:|| Postal: 60640 Frankfurt am Main, Germany|
Phone: +49 69 1344 0
Fax: +49 69 1344 6000
Web page: http://www.ecb.europa.eu/
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.:
- Beyer, Andreas & Doornik, Jurgen A & Hendry, David F, 2001.
"Constructing Historical Euro-Zone Data,"
Royal Economic Society, vol. 111(469), pages 102-121, February.
- David Hendry & Jurgen Doornik, 2000. "Constructing Historical Euro-Zone Data," Economics Series Working Papers 4, University of Oxford, Department of Economics.
- Beyer, A. & Doornik, J.A. & Hendry, D.F., 2000. "Constructing Historical Euro-Zone Data," Economics Working Papers eco2000/10, European University Institute.
- Fisher, Franklin M. & Shell, Karl, 1972. "The Economic Theory of Price Indices," Elsevier Monographs, Elsevier, edition 1, number 9780122577505 edited by Shell, Karl.
- William Barnett & Apostolos Serletis & W. Erwin Diewert, 2005. "The Theory of Monetary Aggregation (book front matter)," Macroeconomics 0511008, EconWPA.
- Swofford, James L., 2000. "Microeconomic foundations of an optimal currency area," Review of Financial Economics, Elsevier, vol. 9(2), pages 121-128, December.
- Stracca, Livio, 2001. "Does liquidity matter? Properties of a synthetic divisia monetary aggregate in the euro area," Working Paper Series 0079, European Central Bank.
- William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005.
- Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
- Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
- W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters,in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc.
- Spencer, Peter, 1997. "Monetary integration and currency substitution in the EMS: The case for a European monetary aggregate," European Economic Review, Elsevier, vol. 41(7), pages 1403-1419, July.
- Richard G. Anderson & Barry E. Jones & Travis D. Nesmith, 1996. "Monetary aggregation theory and statistical index numbers," Working Papers 1996-007, Federal Reserve Bank of St. Louis.
- Reimers, Hans-Eggert, 2002. "Analysing Divisia Aggregates for the Euro Area," Discussion Paper Series 1: Economic Studies 2002,13, Deutsche Bundesbank, Research Centre.
- William A. Barnett, 1979. "Theoretical Foundations for the Rotterdam Model," Review of Economic Studies, Oxford University Press, vol. 46(1), pages 109-130.
- Drake, L. & Mullineux, A., 1995. "One Divisa Money for Europe?," Discussion Papers 95-04, Department of Economics, University of Birmingham.
- Samuelson, Paul A & Sato, Ryuzo, 1984. "Unattainability of Integrability and Definiteness Conditions in the General Case of Demand for Money and Goods," American Economic Review, American Economic Association, vol. 74(4), pages 588-604, September.
- Fisher,Franklin M. & Shell,Karl, 1998. "Economic Analysis of Production Price Indexes," Cambridge Books, Cambridge University Press, number 9780521556231, December.
- Richard G. Anderson, 2006. "Monetary base," Working Papers 2006-049, Federal Reserve Bank of St. Louis.
- W. Erwin Diewert, 2002. "Harmonized Indexes of Consumer Prices: Their Conceptual Foundations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 547-637, December.
- Diewert, Erwin, 2002. "Harmonized indexes of consumer prices: their conceptual foundations," Working Paper Series 0130, European Central Bank.
- Leigh Drake & Andy Mullineux & Juda Agung, 1997. "One Divisia money for Europe?," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 775-786.
- Fischer, Stanley, 1974. "Money and the Production Function," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 517-533, December.
- Barnett, William A, 1979. "The Joint Allocation of Leisure and Goods Expenditure," Econometrica, Econometric Society, vol. 47(3), pages 539-563, May. Full references (including those not matched with items on IDEAS)