Measuring Money Growth When Financial Markets are Changing
This article considers constructing monetary aggregates in the presence of financial market innovations and changes in the relationship between individual assets and output. We propose two procedures for constructing a monetary aggregate with the objective of providing a reliable monetary leading indicator of nominal GDP. In the first, subaggregates discretely switch in and out; in the second, the aggregate's growth is a time-varying weighted average of the growth of the subaggregates, where the weights follow a multivariate random walk. These procedures are used to examine augmenting M2 with stock and/or bond mutual funds. The alternative aggregates are broadly similar to M2, but during 1992â€“1993 they outperform M2.
|Date of creation:||1996|
|Publication status:||Published in Journal of Monetary Economics|
|Contact details of provider:|| Postal: Littauer Center, Cambridge, MA 02138|
Web page: http://www.economics.harvard.edu/
More information through EDIRC
References listed on IDEAS
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.:
- William A. Barnett & Douglas Fisher & Apostolos Serletis, 2006.
"Consumer Theory and the Demand for Money,"
World Scientific Book Chapters,
in: Money And The Economy, chapter 1, pages 3-43
World Scientific Publishing Co. Pte. Ltd..
- Cooley, Thomas F & Prescott, Edward C, 1976. "Estimation in the Presence of Stochastic Parameter Variation," Econometrica, Econometric Society, vol. 44(1), pages 167-184, January.
- Martin Feldstein, 1992. "The Recent Failure of U.S. Monetary Policy," NBER Working Papers 4236, National Bureau of Economic Research, Inc.
- John V. Duca, 1993. "Should bond funds be included in M2?," Working Papers 9321, Federal Reserve Bank of Dallas.
- 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.
- Cooley, Thomas F & Prescott, Edward C, 1973. "An Adaptive Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(2), pages 364-371, June.
- Cooley, Thomas F & Prescott, Edward C, 1973. "Tests of an Adaptive Regression Model," The Review of Economics and Statistics, MIT Press, vol. 55(2), pages 248-256, May.
- Alexander H. Sarris, 1973. "A Bayesian Approach To Estimation Of Time-Varying Regression Coefficients," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 2, number 4, pages 501-523 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:hrv:faseco:2799053. 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: (Office for Scholarly Communication)
If references are entirely missing, you can add them using this form.