How better monetary statistics could have signaled the financial crisis

Barnett, William A.; Chauvet, Marcelle

doi:10.1016/j.jeconom.2010.09.002

Cited by 77 publications

(50 citation statements)

References 56 publications

(49 reference statements)

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“…23 In the years immediately following the Great Recession, the emphasis of the Center for Financial Stability (CFS) on Divisia monetary aggregates has been far more informative than the Federal Reserve's emphasis on interest rates. See, e.g., Barnett (2012) and Barnett and Chauvet (2011a) 23 An overview of much of that literature can be found in Barnett (2012), , Barnett and Chauvet (2011a,b), Barnett and Serletis (2000), Belongia (1996), Belongia and Ireland (2003a,b,c), Serletis (2007), Serletis and Gogas (2014), and Serletis and Shahmoradi (2006). (2008, pp.…”

Section: Discussionmentioning

confidence: 99%

Friedman and Divisia Monetary Measures

Barnett¹

2016

Milton Friedman

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procedure is a very special case of the more general approach. In brief, the general approach consists of regarding each asset as a joint product having different degrees of 'moneyness,' and defining the quantity of money as the weighted sum of the aggregated value of all assets, the weights for individual assets varying from zero to unity with a weight of unity assigned to that asset or assets regarded as having the largest quantity of 'moneyness' per dollar of aggregate value. The procedure we have followed implies that all weights are either zero or unity.The more general approach has been suggested frequently but experimented with only occasionally. We conjecture that this approach deserves and will get much more attention than it has so far received." [Friedman and Schwartz, (1970, pp. 151-152)]

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Section: Discussionmentioning

confidence: 99%

Friedman and Divisia Monetary Measures

Barnett¹

2016

Milton Friedman

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“…Our currency data are from the central banks of member countries. Barnett and Chauvet (2011) observe that from the 1960s to 2005, the U.S. monetary aggregates and their Divisia counterparts diverge more during periods of high uncertainty than in times of stability.…”

Section: The Data and The Variablesmentioning

confidence: 99%

The Demand for Money for EMU: a Flexible Functional Form Approach

Barnett

Gaekwad

2018

Open Econ Rev

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Monetary aggregates have a special role under the "two pillar strategy" of the ECB. Hence, the need for a theoretically consistent measure of monetary aggregates for the European Monetary Union (EMU) is needed. This paper analyzes aggregation over monetary assets for the EMU. We aggregate over the monetary services for the EMU-11 countries, which include Estonia, Finland, France, Germany, Ireland, Italy, Luxembourg, Malta, Netherlands, Slovakia, and Slovenia. We adopt the Divisia monetary aggregation approach, which is consistent with index number theory and microeconomic aggregation theory. The result is a multilateral Divisia monetary aggregate in accordance with Barnett (2007). The multilateral Divisia monetary aggregate for the EMU-11 is found to be more informative and a better signal of economic trends than the corresponding simple sum aggregate. We then analyze substitutability among monetary assets for the EMU-11 within the framework of a representative consumer's utility function, using Barnett's (1983) locally flexible functional form, the minflex Laurent Indirect utility function. The analysis of elasticities with respect to the asset's user-cost prices shows that: (i) transaction balances (TB) and deposits redeemable at notice (DRN) are income elastic, (ii) the DRN display large variation in price elasticity, and (iii) the monetary assets are not good substitutes for each other within the EMU-11. Simple sum monetary aggregation assumes that component assets are perfect substitutes. Hence simple sum aggregation distorts measurement of the monetary aggregate. The ECB has Divisia monetary aggregates provided to the Governing Council at its meetings, but not to the public. Our European Divisia monetary aggregates will be expanded and refined, in collaboration with Wenjuan Chen at the Humboldt University of Berlin, to a complete EMU Divisia monetary aggregates database to be supplied to the public by the Center for Financial Stability in New York City.JEL Classification: C43, C82, D12, E51, F33.

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“…These problems can only be addressed by carefully measuring money using 1 This includes the seminal contributions of Gordon and Leeper (1994), Leeper, Sims, and Zha (1996) Bernanke andMihov (1998), Christiano, Eichenbaum, andEvans (1996) and Christiano, Eichenbaum, and Evans (1999). 2 See, e.g., Barnett and Serletis (2000), Barnett, Chae, and Keating (2005), Barnett, Keating, and Kelly (2008), Barnett and Chauvet (2011), Kelly (2009), and Kelly, Barnett, and Keating (2011 The remainder of the paper is structured as follows. Since the use of Divisa money is quite unusual in this literature, sections two and three will start by introducing the dataset and giving a brief descriptive analysis of the core developments.…”

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The Quantity Theory Revisited: A New Structural Approach

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. to identify the structural shocks to the signal equations of the state space model that explain money growth, inflation, and GDP growth. We also account for the possibility that measurement error exhibited by simple-sum monetary aggregates causes the consequences of monetary shocks to be improperly identified by using a Divisia monetary aggregate. Our findings suggest that when the money is measured using a reputable index number, the quantity theory holds for the United States. Terms of use: Documents in

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How better monetary statistics could have signaled the financial crisis

Cited by 77 publications

References 56 publications

Friedman and Divisia Monetary Measures

Friedman and Divisia Monetary Measures

The Demand for Money for EMU: a Flexible Functional Form Approach

The Quantity Theory Revisited: A New Structural Approach

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