Chinese Divisia Monetary Index and GDP Nowcasting

Barnett, William A.; Tang, Biyan

doi:10.1007/s11079-016-9406-z

Cited by 14 publications

(8 citation statements)

References 30 publications

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“…Overall, the trend is that model 2 produces better results. The possible reason is that, during this time span of Jan 2002 to August 2018, China's economy had a regime change as explained in Barnett and Tang's (2016) paper. The magnitude of improvement is much more significant due to the US data's long history, and a more mature financial market than that of China.…”

Section: Resultsmentioning

confidence: 99%

The Predictive Power of the User Cost Spread for Economic Recession in China and the US

Chang

Mattson²,

Tang

2019

IJFS

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The predictive power of the yield curve slope, or the yield spread is well established in the United States (US) and European Union (EU) countries since 1998. However, there exists a gap in the literature on the predictive power of the yield spread on the Chinese economy. This paper provides a different leading recession indicator using the Chinese and US economy as comparative examples: the user cost spread, being the difference of the opportunity costs of holding government securities of different maturities. We argue that the user cost spread, based on the Divisia monetary aggregate data like the ones produced by the Center for Financial Stability, provides improved predictive ability and a better intuitive explanation based on changes in the user cost price of holding bonds.

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Section: Resultsmentioning

confidence: 99%

The Predictive Power of the User Cost Spread for Economic Recession in China and the US

Chang

Mattson²,

Tang

2019

IJFS

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“…traditional) money and Divisia in particular in turbulent times, with the response of Divisia following the theoretical expectations regarding money. A large range of papers have developed new aggregates, sometimes for countries where they are not reported officially (see, for example, Binner et al (2009) for the Euro Area, and Barnett and Tang (2016) for China) or to augment the basic indices (see for example Binner et al (2018) for risk augmented aggregates for the UK and the US).…”

Section: Measuring Moneymentioning

confidence: 99%

Shadow of the colossus: Euro area spillovers and monetary policy in Central and Eastern Europe

El‐Shagi

Tochkov

2022

Journal of International Money and Finance

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Closer integration between Central and Eastern Europe (CEE) and the EU has opened up channels facilitating the propagation of economic shocks from the core to the eastern periphery. This paper examines the effects of such shocks to economic activity and monetary conditions originating in the Euro Area (EA) on output, prices, money, and interest rates in 10 CEE countries over the period 2005-2018 using a bilateral restricted VAR framework. In contrast to previous studies, we use Divisia monetary aggregates and compare the effects of EA spillovers to domestic shocks. The results indicate that EA shocks explain the majority of variation across all macroeconomic indicators, with money supply shocks playing the most prominent role. Despite some heterogeneity, the impulse response of monetary aggregates to domestic and EA monetary shocks is almost identical across countries. The impact of the EA shock increases over time and persists, while the domestic shock dies out relatively quickly. Accordingly, we find no meaningful monetary independence in the majority of CEE countries. This is likely to prove detrimental to the effectiveness of monetary policies in CEE.

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“…Schunk (2001) reveals that broad and narrow Divisia monetary aggregates perform better than simple sum monetary aggregates in terms of information content in predicting real economic activity and prices. In terms of nowcasting, additional information can be generated when Divisia monetary aggregates are included as one of the indicators in factor models (Barnett & Tang 2016). The performance of various Divisia monetary aggregates are superior in capturing financial innovations and regulatory alterations (Darrat et al, 2005).…”

Section: Literature Reviewmentioning

confidence: 99%

Revisiting Money Demand in Malaysia: Simple-Sum versus Divisia Monetary Aggregates

2018

JEM

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bNM has discarded the use of monetary targeting due to the speeding up of financial reforms as the relationship between money and important macroeconomic indicators in Malaysia has weakened. However, the implementation of the interest rate targeting requires the authorities to alter the policy rate recurrently. Alternatively, the authorities may consider monetary targeting, which provides the ease of control of monetary aggregates, provided that a stable demand for money function can be derived. Nevertheless, financial liberalization has greatly affected the stability of money demand. Thus, this study estimated the demand for money function in Malaysia by considering the effect of the financial development in which a Divisia monetary aggregate has been constructed as an alternative measure of money and a monetization variable has been included in the function. The Johansen and Juselius cointegration test and error correction model are utilized to estimate the demand for money function. The empirical findings indicate that a plausible demand for money function is derived using Divisia M2. Furthermore, monetization appears as an important variable that contributes to a stable money demand. The presence of a stable Divisia M2 money demand has reassured the usefulness of monetary aggregate as the indicator for monetary policy purposes. Monetary targeting provides alternative policy target choice for the conduct of monetary policy. Divisia monetary aggregates can also serve as the alternative money measurement apart from the conventional money supply.

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Chinese Divisia Monetary Index and GDP Nowcasting

Cited by 14 publications

References 30 publications

The Predictive Power of the User Cost Spread for Economic Recession in China and the US

The Predictive Power of the User Cost Spread for Economic Recession in China and the US

Shadow of the colossus: Euro area spillovers and monetary policy in Central and Eastern Europe

Revisiting Money Demand in Malaysia: Simple-Sum versus Divisia Monetary Aggregates

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