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The domestic adjusted monetary base

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  • Richard G. Anderson
  • Robert H. Rasche

Abstract

This paper provides a consistent, monthly measure of the amount of the U.S. adjusted monetary base that is domestically held, and of the amount held abroad. Most macroeconomic models that address the role of outside money as a determinant of the economy's aggregate price level are closed economy models, suggesting a need to accurately measure the domestic monetary base. To do so, this paper presents a new method to estimate the amount of U.S. currency held abroad, a method which exploits data on the processing of currency at the Federal Reserve's 37 cash offices. Estimates of domestic monetary aggregates, including domestic M1 and M2, also are produced. Relative to previous studies and estimates currently included in the Flow of Funds and the National Income and Product Accounts, our estimates suggest larger currency exports during the 1970s and early 1980s, and a sharp slowing of exports since 1995.

Suggested Citation

  • Richard G. Anderson & Robert H. Rasche, 2000. "The domestic adjusted monetary base," Working Papers 2000-002, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2000-002
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    References listed on IDEAS

    as
    1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Modeling money," Working Paper Series, Macroeconomic Issues WP-97-17, Federal Reserve Bank of Chicago.
    2. Fama, Eugene F., 1983. "Financial intermediation and price level control," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 7-28.
    3. Christian Gilles & Pamela A. Labadie & Wilbur John Coleman II., 1996. "A model of the federal funds market," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 337-357.
    4. Paul Bennett & R. Spence Hilton, 1997. "Falling reserve balances and the federal funds rate," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 3(May).
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    Citations

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    Cited by:

    1. Aksoy, Yunus & Piskorski, Tomasz, 2006. "U.S. domestic money, inflation and output," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 183-197, March.
    2. Richard G. Anderson & Robert H. Rasche, 1999. "Eighty years of observations on the adjusted monetary base: 1918-1997," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 3-22.
    3. Batini, Nicoletta & Nelson, Edward, 2001. "The Lag from Monetary Policy Actions to Inflation: Friedman Revisited," International Finance, Wiley Blackwell, vol. 4(3), pages 381-400, Winter.
    4. Andrés, Javier & David López-Salido, J. & Nelson, Edward, 2009. "Money and the natural rate of interest: Structural estimates for the United States and the euro area," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 758-776, March.
    5. William R. Emmons, 1999. "What can "buy-and-hold" stock investors expect?," Monetary Trends, Federal Reserve Bank of St. Louis, issue Jun.
    6. William T. Gavin & Finn E. Kydland, 2000. "The nominal facts and the October 1979 policy change," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 39-61.
    7. Barnett, William A, 1997. "Which Road Leads to Stable Money Demand?," Economic Journal, Royal Economic Society, vol. 107(443), pages 1171-1185, July.
    8. Michael J. Dueker, 1999. "A barometer of financial market uncertainty," Monetary Trends, Federal Reserve Bank of St. Louis, issue May.
    9. Frank A. Schmid, 1999. "Quality spreads in the bond market," Monetary Trends, Federal Reserve Bank of St. Louis, issue Jul.
    10. Le Maux, Laurent, 2003. "Dollarisation officielle : analyse critique et alternative," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(3), pages 367-391, Septembre.
    11. 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.
    12. Alton Gilbert, 1999. "Has the quality of bank loans deteriorated?," Monetary Trends, Federal Reserve Bank of St. Louis, issue Aug.
    13. Andres, Javier & Lopez-Salido, J. David & Nelson, Edward, 2005. "Sticky-price models and the natural rate hypothesis," Journal of Monetary Economics, Elsevier, vol. 52(5), pages 1025-1053, July.
    14. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
    15. Patricia S. Pollard, 2001. "The creation of the Euro and the role of the dollar in international markets," Review, Federal Reserve Bank of St. Louis, issue May, pages 17-36.
    16. Joe Haslag & R.W. Hafer & Garett Jones, 2003. "The Effect of Monetary Policy on Economic Output," Working Papers 0311, Department of Economics, University of Missouri.
    17. James Woods, 2003. ""Money" is the Reserves not the Money," Macroeconomics 0309019, EconWPA, revised 28 Dec 2003.
    18. Aksoy, Yunus & Piskorski, Tomasz, 2005. "US domestic currency in forecast error variance decompositions of inflation and output," Economics Letters, Elsevier, vol. 86(2), pages 265-271, February.

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    Keywords

    Money supply ; Money ; Dollar; American;

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