The Changing Empirical Definition of Money: Some Estimates from a Model of the Demand for Money Substitutes

Michael T. Belongia · James A. Chalfant

82 citations0/0 files storedJournal of Political Economy

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Monetary Policy and Economic Impact Banking stability, regulation, efficiency Economic theories and models

Abstract

Interest-bearing checkable deposits are examined to test whether they should be included in measures of the U.S. money stock. Both Divisia and traditional simple-sum aggregates are constructed on the basis of tests for weak separability in a model of the demand for financial assets. Using nonparametric demand analysis, we find that several groups of assets are compatible with aggregation theory. We find empirical support for a narrow measure consisting of the components of current MIA. In tests based on a St. Louis equation and in terms of controllability, a Divisia aggregate performs better than the simple-sum MIA measure.

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References

1982The Nonparametric Approach to Demand Analysis 1967The Construction of Utility Functions from Expenditure Data 1978The user cost of money 1979Causality tests in econometrics 2016Competitive Interest Payments on Bank Deposits and the Long-Run Demand for Money: Reply 1964Aggregation in Economic Analysis: An Introductory Survey.1984The Translog Utility Function and the Demand for Money in the United States

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1991CAN WE TAKE THE CON OUT OF MEAT DEMAND STUDIES?2004Sweep programs and optimal monetary aggregation 1992An Extended Series of Divisia Monetary Aggregates 1995The economist-as-audience needs a methodology of plausible inference 1989An Admissible Monetary Aggregate for The United Kingdom 2000Modeling the ECU Against the U.S. Dollar: A Structural Monetary Interpretation 1997Monetary integration and currency substitution in the EMS: The case for a European monetary aggregate

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