Consumer Theory and the Demand for Money

Barnett, William A.; Fisher, Douglas; Serletis, Apostolos

doi:10.1142/9789812773500_0001

Cited by 58 publications

(64 citation statements)

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“…The earliest comparisons are in Barnett (1982) and Barnett, Offenbacher, and Spindt (1984). Barnett and Serletis (2000) collect together and reprint seminal journal articles from this literature.…”

Section: The Historymentioning

confidence: 99%

How better monetary statistics could have signaled the financial crisis

Barnett

Chauvet

2011

Journal of Econometrics

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This paper explores the disconnect of Federal Reserve data from index number theory. A consequence could have been the decreased systemic-risk misperceptions that contributed to excess risk taking prior to the housing bust. We find that most recessions in the past 50 years were preceded by more contractionary monetary policy than indicated by simple-sum monetary data. Divisia monetary aggregate growth rates were generally lower than simple-sum aggregate growth rates in the period preceding the Great Moderation, and higher since the mid 1980s. Monetary policy was more contractionary than likely intended before the 2001 recession and more expansionary than likely intended during the subsequent recovery.

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Section: The Historymentioning

confidence: 99%

How better monetary statistics could have signaled the financial crisis

Barnett

Chauvet

2011

Journal of Econometrics

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“…Table 1 presents the PP test for the null hypothesis that each series contains a unit root against the alternative hypothesis that it does not. Ten-Year Government Bond Yield −9.827 (0.000)*** [4] Note: The number in bracket is the optimal bandwidth determined by the Bartlett kenel. The number in parenthesis is the p-value of rejecting the null hypothesis of unit root.…”

Section: Results Of Unit Root Testmentioning

confidence: 99%

“…Barnett et al [4] indicate that the results of stability in money demand stem from the use of a linear model. Empirical studies also focus on the Asian economies.…”

Section: Introductionmentioning

confidence: 99%

Instability of Money Demand: Recent Evidence for Thailand

Jiranyakul¹,

Opiela²

2014

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This study examines the short-run and long-run stability properties of money demand in Thailand using the monetary aggregates M1, M2 and M3, for the period from 1993Q1 to 2012Q4. We use the dynamic OLS specification of Stock and Watson (1993) and Ball (2001), and the estimation technique of the Johansen cointegration test to determine the stability of money demand. The results from the Johansen cointegration test reveal that there is only a long-run relationship between M1 money demand and real GDP (a proxy for real income) and interest rate. In the short run, only a change in real GDP affects M1 money holdings. In the long-run both real GDP and an interest rate determine money demand. The short-run instability of M1 money demand makes it difficult for the monetary authorities to use M1 as an intermediate target to control intermediate-run and long-run inflation.

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“…In particular, Belongia (1996) replicates some studies on the impact of money on economic activity and compares results acquired using a Divisia index instead of the originally used simple sum index, Schunk (2001) investigates the forecasting performance of the Divisia index compared with the simple sum aggregates, and Belongia and Ireland (2006) explore the policy implications in the dual space of aggregated user costs and interest rates. Barnett and Serletis (2000) collect together and reprint seminal journal articles from this literature.…”

Section: Introductionmentioning

confidence: 99%

International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview

Barnett

Chauvet

2011

Financial Aggregation and Index Number Theory

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This paper comprises a survey of a half century of research on international monetary aggregate data. We argue that since monetary assets began yielding interest, the simple sum monetary aggregates have had no foundations in economic theory and have sequentially produced one source of misunderstanding after another. The bad data produced by simple sum aggregation have contaminated research in monetary economics, have resulted in needless "paradoxes," and have produced decades of misunderstandings in international monetary economics research and policy. While better data, based correctly on index number theory and aggregation theory, now exist, the official central bank data most commonly used have not improved in most parts of the world. While aggregation theoretic monetary aggregates exist for internal use at the European Central Bank, the Bank of Japan, and many other central banks throughout the world, the only central banks that currently make aggregation theoretic monetary aggregates available to the public are the Bank of England and the St. Louis Federal Reserve Bank. No other area of economics has been so seriously damaged by data unrelated to valid index number and aggregation theory. In this paper we chronologically review the past research in this area and connect the data errors with the resulting policy and inference errors. Future research on monetary aggregation and policy can most advantageously focus on extensions to exchange rate risk and its implications for multilateral aggregation over monetary asset portfolios containing assets denominated in more than one currency. The relevant theory for multilateral aggregation with exchange rate risk has been derived by Barnett (2007) and Barnett and Wu (2005).

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Consumer Theory and the Demand for Money

Cited by 58 publications

References 0 publications

How better monetary statistics could have signaled the financial crisis

How better monetary statistics could have signaled the financial crisis

Instability of Money Demand: Recent Evidence for Thailand

International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview

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