The Optimal Level of Monetary Aggregation

“…The growth rate weights resulting from this approach are different across assets, depending on all of the quantities and interest rates in each share, and those weights can be time-varying at each point in time. For a detailed description of the theory underlying this construction, see Barnett (1982Barnett ( , 1987.…”

Section: The Historymentioning

confidence: 99%

“…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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“…5 See Barnett (1982) for a rigorous discussion on this topic. For nonmathematical explanations, see Barnett (2008 Barnett and Alkhareif (2013).…”

Section: The Chinese Divisia Indexmentioning

confidence: 99%

Chinese Divisia Monetary Index and GDP Nowcasting

Barnett

Tang

2016

Open Econ Rev

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GDP data are published only quarterly and with a substantial lag, while many monetary and financial decisions are made at a higher frequency. GDP nowcasting can evaluate the current month's GDP growth rate, given the available economic data up to the point at which the nowcasting is conducted. Therefore, nowcasting GDP has become an increasingly important task for central banks. This paper nowcasts Chinese monthly GDP growth rate using a dynamic factor model, incorporating as indicators the Divisia monetary aggregate indexes, Divisia M1 and M2 along with additional information from a large panel of other relevant time series data. The results show that Divisia monetary aggregates contain more indicator information than the simple sum aggregates, and thereby help the factor model produce the best available nowcasting results.In addition, our results demonstrate that China's economy experienced a regime switch or structure break in 2012, which a Chow test confirmed the regime switch. Before and after the regime switch, the factor models performed differently. We conclude that different nowcasting models should be used during the two regimes.

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The Optimal Level of Monetary Aggregation

Cited by 125 publications

References 10 publications

The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources

The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources

How better monetary statistics could have signaled the financial crisis

Chinese Divisia Monetary Index and GDP Nowcasting

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