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Measuring the Economic Stock of Money

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  • Kelly, Logan

Abstract

Aggregation theoretic measures of the capital stock of money have in the past been criticized for their dependence on future expectations. I attempt to answer some of those objections by using several forecasting methods to generate expectations needed for calculating the economic stock of money. I show that targeted factor model forecasting improves the accuracy of monetary capital stock measurements slightly. However, I also find, as has previous research, that monetary capital stock calculations are robust to assumptions about future expectation. I believe these findings tend to support the conclusion that concerns about the dependency of theoretical monetary stock aggregates on forecasted future expectations have been overstated.

Suggested Citation

  • Kelly, Logan, 2007. "Measuring the Economic Stock of Money," MPRA Paper 4914, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4914
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    References listed on IDEAS

    as
    1. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-237, April.
    2. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
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    4. Pesando, James E, 1979. "On the Random Walk Characteristics of Short- and Long-Term Interest Rates in an Efficient Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 457-466, November.
    5. Boivin, Jean & Ng, Serena, 2006. "Are more data always better for factor analysis?," Journal of Econometrics, Elsevier, vol. 132(1), pages 169-194, May.
    6. Stock, James H. & Watson, Mark W., 1999. "Forecasting inflation," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 293-335, October.
    7. William Barnett, 2005. "Monetary Aggregation," Macroeconomics 0503017, EconWPA.
    8. William A Barnett & Unja Chae & John W Keating, 2012. "Forecast Design In Monetary Capital Stock Measurement," Global Journal of Economics (GJE), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-53.
    9. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    10. Barnett, William A. & Liu, Yi & Jensen, Mark, 1997. "Capm Risk Adjustment For Exact Aggregation Over Financial Assets," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 485-512, June.
    11. repec:cup:macdyn:v:1:y:1997:i:2:p:485-512 is not listed on IDEAS
    12. Bai, Jushan & Ng, Serena, 2006. "Evaluating latent and observed factors in macroeconomics and finance," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 507-537.
    13. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    14. Elliott, J Walter & Baier, Jerome R, 1979. "Econometric Models and Current Interest Rates: How Well Do They Predict Future Rates?," Journal of Finance, American Finance Association, vol. 34(4), pages 975-986, September.
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    More about this item

    Keywords

    Monetary Aggregation; Money Stoc; ; Economic Stock of Money; Targeted Factor Models;

    JEL classification:

    • E49 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Other

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