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Beyond the Risk Neutral Utility Function

Author

Listed:
  • William A. Barnett

    (Washington University in St. Louis)

  • Yi Liu

    (University of S. Alabama)

Abstract

This paper contains a survey and overview of the research recently completed by the authors on the extension of Divisia monetary aggregation to include risk aversion.

Suggested Citation

  • William A. Barnett & Yi Liu, 1996. "Beyond the Risk Neutral Utility Function," Macroeconomics 9602001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9602001
    Note: Type of Document - Microsoft Word; prepared on Macintosh; to print on PostScript; pages: 22 ; figures: none. We presented this paper at the conference on Divisia Monetary Aggregation held at the University of Mississippi. The paper will appear in the proceedings volume, to be published by Macmillan. The editor of the forthcoming volume is Michael Belongia.
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    References listed on IDEAS

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    1. James M. Poterba & Julio J. Rotemberg, 1986. "Money in the Utility Function: An Empirical Implementation," Working papers 408, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. 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..
    3. K. Alec Chrystal & Ronald MacDonald, 1994. "Empirical evidence on the recent behavior and usefulness of simple-sum and weighted measures of the money stock," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 73-109.
    4. William A. Barnett & Milka Kirova & Meenakshi Pasupathy, 2000. "Estimating Policy-Invariant Deep Parameters in the Financial Sector When Risk and Growth Matter," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 530-557, Emerald Group Publishing Limited.
    5. Belongia, Michael T & Chalfant, James A, 1989. "The Changing Empirical Definition of Money: Some Estimates from a Model of the Demand for Money Substitutes," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 387-397, April.
    6. William A. Barnett & Yi Liu, 1996. "The CAPM-Extended Divisia Monetary Aggregate with Exact Tracking under Risk," Finance 9602001, University Library of Munich, Germany.
    7. Rotemberg, Julio J & Driscoll, John C & Poterba, James M, 1995. "Money, Output, and Prices: Evidence from a New Monetary Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 67-83, January.
    8. William A. Barnett, 2000. "Economic Monetary Aggregates: An Application of Index Number and Aggregation Theory," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 11-48, Emerald Group Publishing Limited.
    9. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
    10. William A. Barnett & Melvin Hinich & Piyu Yue, 2000. "Monitoring Monetary Aggregates Under Risk Aversion," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 217-244, Emerald Group Publishing Limited.
    11. William A. Barnett & Jeong Ho Hahm, 2004. "Financial Firm Production of Monetary Services: A Generalized Symmetric Barnett Variable Profit Function Approach," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 351-380, Emerald Group Publishing Limited.
    12. William A. Barnett & Melvin J. Hinich & Warren E. Weber, 2000. "The Regulatory Wedge Between the Demand-Side and Supply-Side Aggregation-Theoretic Monetary Aggregates," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 433-453, Emerald Group Publishing Limited.
    13. William Barnett, 2005. "Monetary Aggregation," Macroeconomics 0503017, University Library of Munich, Germany.
    14. William A. Barnett & Edward K. Offenbacher & Paul A. Spindt, 2000. "The New Divisia Monetary Aggregates," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 360-388, Emerald Group Publishing Limited.
    15. William A. Barnett, 2000. "The Optimal Level of Monetary Aggregation," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 125-149, Emerald Group Publishing Limited.
    16. William A. Barnett, 2000. "The User Cost of Money," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 6-10, Emerald Group Publishing Limited.
    17. Swofford, James L & Whitney, Gerald A, 1987. "Nonparametric Tests of Utility Maximization and Weak Separability for Consumption, Leisure and Money," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 458-464, August.
    18. William A. Barnett & Ge Zhou, 1994. "Symposium on mutual funds and monetary aggregates - commentary," Proceedings, Federal Reserve Bank of St. Louis, issue Nov, pages 53-78.
    19. PHLIPS, Louis & SPINNEWYN, Frans, 1982. "Rationality versus myopia in dynamic demand systems," LIDAM Reprints CORE 468, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    20. William A. Barnett & Ge Zhou, 2004. "Financial Firm's Production and Supply-Side Monetary Aggregation Under Dynamic Uncertainty," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 381-427, Emerald Group Publishing Limited.
    21. Belongia, Michael T, 1996. "Measurement Matters: Recent Results from Monetary Economics Reexamined," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1065-1083, October.
    22. 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.
    23. William C. Brainard, 1994. "Financial firm's production and supply-side monetary aggregation under dynamic uncertainty: commentary," Proceedings, Federal Reserve Bank of St. Louis, issue Mar, pages 166-168.
    24. William A. Barnett & Seungmook Choi, 2004. "A Monte Carlo Study of Tests of Blockwise Weak Separability," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 257-287, Emerald Group Publishing Limited.
    25. Drake, Leigh & Chrystal, K Alec, 1994. "Company-Sector Money Demand: New Evidence on the Existence of a Stable Long-Run Relationship for the United Kingdom," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(3), pages 479-494, August.
    26. Diewert, W E, 1980. "Capital and the Theory of Productivity Measurement," American Economic Review, American Economic Association, vol. 70(2), pages 260-267, May.
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    Citations

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    Cited by:

    1. Barnett, William A. & Liu, Jinan, 2019. "User cost of credit card services under risk with intertemporal nonseparability," Journal of Financial Stability, Elsevier, vol. 42(C), pages 18-35.
    2. Elger Thomas & Binner Jane M., 2004. "The UK Household Sector Demand for Risky Money," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-22, March.
    3. William A. Barnett & Shu Wu, 2011. "On User Costs of Risky Monetary Assets," World Scientific Book Chapters, in: Financial Aggregation And Index Number Theory, chapter 3, pages 85-105, World Scientific Publishing Co. Pte. Ltd..
    4. William Barnett & Shu Wu, 2004. "Intertemporally non-separable monetary-asset risk adjustment and aggregation," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-9.
    5. William A. Barnett & Yi Liu & Haiyang Xu & Mark Jensen, 1996. "The CAPM Risk Adjustment Needed for Exact Aggregation over Financial Assets," Econometrics 9602003, University Library of Munich, Germany.
    6. Elger, Thomas, 2002. "The Demand for Monetary Assets in the UK; a Locally Flexible Demand System Analysis," Working Papers 2002:6, Lund University, Department of Economics.
    7. repec:ebl:ecbull:v:5:y:2004:i:13:p:1-9 is not listed on IDEAS
    8. Belongia, Michael, 2005. "Where simple sum and Divisia monetary aggregates part: illustrations and evidence for the United States," MPRA Paper 18969, University Library of Munich, Germany, revised Mar 2005.
    9. Binner, Jane & Elger, Thomas, 2002. "The UK Personal Sector Demand for Risky Money," Working Papers 2002:9, Lund University, Department of Economics.
    10. Binner, Jane & Elger, Thomas & de Peretti, Philipe, 2002. "Is UK Risky Money Weakly Separable? A Stochastic Approach," Working Papers 2002:13, Lund University, Department of Economics.

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    More about this item

    Keywords

    money index risk Divisia aggregation;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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