Friedman and Divisia Monetary Measures

Abstract

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)]

The Demand for Assets and Optimal Monetary Aggregation

“…Although we report some Morishima elasticities of substitution that are higher than those reported by studies that have been carried out in the context of highly aggregated demand systems, we conclude that in general the monetary assets are far from being perfect substitutes, thus providing evidence against what Barnett () refers to as the “Linearity Condition.” It means that the monetary aggregates cannot be computed using the simple‐sum index or any other linear formula and that an index consistent with a nonlinear aggregator function is needed. Most of the work on monetary aggregation over the last 30 years that builds on Barnett () has applied the Divisia index formula.…”

“…Statistical tests reject a large set of null hypotheses that would be consistent with the existence of one or more theoretically coherent subbaggregates of various subsets of the monetary assets. These tests support and reinforce Barnett's () assertion that empirical work in monetary economics should employ, as a measure of money, the broadest M4 monetary aggregate prepared by the CFS, which includes all 15 monetary assets, as opposed to narrower aggregates such as M1 or M2. We believe that our estimates of disaggregated monetary demand responses are of importance in resolving paradoxes associated with the measurement of money, in solving the Barnett critique, and in understanding the effects of potential monetary policy actions.…”

“…One of the most important objectives of research in this area over the last 30 years has been to discover the structure of preferences over monetary assets. As already noted, a formal procedure for correct monetary aggregation, consistent with microeconomic and aggregation theory, as was suggested over 30 years ago by Barnett (, ) and more recently by Barnett (), has not yet been implemented. Although the use of the Divisia index partly solves the “Barnett critique,” monetary asset groupings consistent with the optimizing behavior of economic agents are not yet available.…”

“…Regarding stage 3, it cannot be accomplished without prior completion of stage 1. For more details, see also Barnett ().…”

Investing in the Early Years: The Costs and Benefits of Investing in Early Childhood in New Hampshire

“…41 New Hampshire remains one of eight states that have yet to dedicate state funds to expanding access to and raising the quality of one-or twoyear preschool programs. As noted in the Yearbook, the NHD-HHS has oversight over early care and learning programs from birth to kindergarten entry, including preschool programs.…”