The Optimal Level of Monetary Aggregation in the UK
This paper tests the weak separability of the assets in the Bank of England's household-sector Divisia index from 1977Q1 to 2000Q4. The study is based on a revealed preference framework and uses a nonparametric procedure that jointly tests necessary and sufficient conditions for weak separability, allows for incomplete adjustment of expenditure on monetary services, and allows for measurement errors in the monetary quantity data. The assets included in the Bank of England Divisia index are weakly separable with complete adjustment in two sub-samples covering most of the eighties. A narrower aggregate is weakly separable with complete adjustment in each sub-sample we investigated.
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|Date of creation:||09 Mar 2004|
|Date of revision:||26 Jan 2005|
|Publication status:||Published in Macroeconomic Dynamics, 2008, pages 117-131.|
|Note:||This paper has been published as "A Note on the Optimal Level of Monetary Aggregation in the UK."|
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