Redundancy or Mismeasurement? A Reappraisal of Money

Joshua Hendrickson ()

MPRA Paper from University Library of Munich, Germany

Abstract: The emerging consensus in monetary policy and business cycle analysis is that money aggregates are not useful as an intermediate target for monetary policy or as an information variable. The uselessness of money as an intermediate target is driven by empirical research that suggests that money demand is unstable. In addition, the informational quality of money has been called into question by empirical research that fails to identify a relationship between money growth and inflation, nominal income growth, and the output gap. Nevertheless, this research is potentially flawed by the use of simple sum money aggregates, which are not consistent with economic, aggregation, or index number theory. This paper therefore re-examines previous empirical evidence on money demand and the role of money as an information variable using monetary services indexes as monetary aggregates. These aggregates have the advantage of being derived from microtheoretic foundations as well as being consistent with aggregation and index number theory. The results of the re-evaluation suggest that previous empirical work might be driven by mismeasurement.

Keywords: monetary aggregates; money; business cycles; money demand; cointegrated VAR (search for similar items in EconPapers)
JEL-codes: E31 E32 E41 E42 (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-cba, nep-hpe, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/21477/1/MPRA_paper_21477.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/83740/1/MPRA_paper_83740.pdf revised version (application/pdf)

Related works:
Journal Article: REDUNDANCY OR MISMEASUREMENT? A REAPPRAISAL OF MONEY (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:21477

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().