IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpma/9309002.html

The Tracking Ability of the Divisia Monetary Aggregate Under Risk

Author

Listed:
  • Mark J. Jensen

Abstract

This paper attempts to establish a link between aggregation and index theory, which exists under perfect certainty, but is not known to exist under risk aversion. The paper develops a consumer based demand for money problem where the consumer is risk averse and has a known theoretical monetary aggregate. This dynamic optimization problem's solutions are approximated by the numerical Parameterized Expectation Approach and used to calculate the theoretical and Divisia monetary aggregate. The paper shows that for certain model parameter values the approximated rational expectation solutions cause the Divisia aggregate to closely track the theoretical monetary aggregate, and hence, establishes a link between aggregation and index theory when risk is present. Unfortunately, for other parameter values the Parameterized Expectation Approach fails to provide adequate solutions to conclude that this tracking continues when the level of risk aversion is large or when a different theoretical monetary aggregate exists.

Suggested Citation

  • Mark J. Jensen, 1993. "The Tracking Ability of the Divisia Monetary Aggregate Under Risk," Macroeconomics 9309002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9309002
    Note: The paper is a Latex style document. The figures can be obtained by e-mailing me at jensen@wuecona.wustl.edu for them.
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/9309/9309002.tex
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/9309/9309002.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/9309/9309002.ps.gz
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barnett, William A., 2006. "Supply of Money," MPRA Paper 419, University Library of Munich, Germany.
    2. Richard G. Anderson & Barry E. Jones & Travis D. Nesmith, 1997. "Special report: The monetary services index project of the Federal Reserve Bank of St. Louis: introduction to the St. Louis monetary services index project," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 25-30.
    3. William A. Barnett & Chang Ho Kwag, 2011. "Exchange Rate Determination from Monetary Fundamentals: An Aggregation Theoretic Approach," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 5, pages 151-166, World Scientific Publishing Co. Pte. Ltd..
    4. William A. Barnett, 2000. "Which Road Leads to Stable Money Demand?," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 577-592, Emerald Group Publishing Limited.
    5. William A. Barnett & Yi Liu, 1996. "The CAPM-Extended Divisia Monetary Aggregate with Exact Tracking under Risk," Finance 9602001, University Library of Munich, Germany.
    6. William A. Barnett, 2000. "Perspective on the Current State of Macroeconomic Theory," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 593-605, Emerald Group Publishing Limited.
    7. Bergh , Andreas & Nilsson, Therese, 2008. "Do economic liberalization and globalization increase income inequality?," Working Papers 2008:12, Lund University, Department of Economics.
    8. William Barnett & Apostolos Serletis & Demitre Serletis, 2005. "Nonlinear and Complex Dynamics in Real Systems," GE, Growth, Math methods 0509002, University Library of Munich, Germany.
    9. Travis D. Nesmith, 2005. "Solving stochastic money-in-the-utility-function models," Finance and Economics Discussion Series 2005-52, Board of Governors of the Federal Reserve System (U.S.).
    10. Barnett, William A., 2006. "Divisia Monetary Index," MPRA Paper 418, University Library of Munich, Germany.
    11. William A. Barnett, 2013. "Friedman and Divisia Monetary Measures," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201312, University of Kansas, Department of Economics, revised Dec 2013.
    12. Jane Binner & Rakesh Bissoondeeal & Thomas Elger & Alicia Gazely & Andrew Mullineux, 2004. "Vector autoregressive models versus neural networks in forecasting: an application to Euro-inflation and divisia money," Money Macro and Finance (MMF) Research Group Conference 2003 5, Money Macro and Finance Research Group.
    13. Paul Gilbert & Lise Pichette, 2003. "Dynamic Factor Analysis for Measuring Money," Staff Working Papers 03-21, Bank of Canada.
    14. William A. Barnett & Marcelle Chauvet & Heather L. R. Tierney, 2011. "Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 7, pages 207-249, World Scientific Publishing Co. Pte. Ltd..
    15. Randal J. Verbrugge, 1998. "Cross-Sectional and Longitudinal Inflation Asymmetries," Macroeconomics 9809018, University Library of Munich, Germany.
    16. William A. Barnett & Melvin J. Hinich & Piyu Yue, 2011. "The Exact Theoretical Rational Expectations Monetary Aggregate," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 2, pages 53-84, World Scientific Publishing Co. Pte. Ltd..
    17. J. Christina Wang, 2003. "Loanable funds, risk, and bank service output," Working Papers 03-4, Federal Reserve Bank of Boston.
    18. Barnett, William A., 2006. "Comments on "Chaotic monetary dynamics with confidence"," Journal of Macroeconomics, Elsevier, vol. 28(1), pages 253-255, March.
    19. 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.
    20. William A. Barnett & A. Ronald Gallant & Melvin J. Hinich & Jochen A. Jungeilges & Daniel T. Kaplan, 2004. "A Single-Blind Controlled Competition Among Tests for Nonlinearity and Chaos," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 581-615, Emerald Group Publishing Limited.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpma:9309002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA The email address of this maintainer does not seem to be valid anymore. Please ask EconWPA to update the entry or send us the correct address (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.