Money, Output and Prices: Evidence from A New Monetary Aggregate / Julio J. Rotemberg, John C. Driscoll, James M. Poterba.

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Rotemberg, Julio J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w3824.Publication details: Cambridge, Mass. National Bureau of Economic Research 1991.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper develops a new utility-based monetary aggregate which we label the currency equivalent aggregate. This aggregate equals the stock of currency that would be required for households to obtain the same liquidity services that they get from their entire collection of monetary assets. We compare the ability of the new aggregate and conventional aggregates, such as Ml and M2, and other indicators of monetary policy to forecast real activity. The CE aggregate has more predictive power for output and prices than standard aggregates, and the time path of the estimated output response is more consistent with broad classes of theoretical models.

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August 1991.

This paper develops a new utility-based monetary aggregate which we label the currency equivalent aggregate. This aggregate equals the stock of currency that would be required for households to obtain the same liquidity services that they get from their entire collection of monetary assets. We compare the ability of the new aggregate and conventional aggregates, such as Ml and M2, and other indicators of monetary policy to forecast real activity. The CE aggregate has more predictive power for output and prices than standard aggregates, and the time path of the estimated output response is more consistent with broad classes of theoretical models.