How Better Monetary Statistics Could Have Signaled the Financial Crisis

William Barnett and Marcelle Chauvet

No 201005, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: 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.

Keywords: Measurement error; monetary aggregation; Divisia index; aggregation; monetary policy; index number theory; financial crisis; great moderation; Federal Reserve. (search for similar items in EconPapers)
JEL-codes: C43 E32 E40 E52 E58 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2010-08, Revised 2010-08
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www2.ku.edu/~kuwpaper/2009Papers/201005.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www2.ku.edu:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Journal Article: How better monetary statistics could have signaled the financial crisis (2011)
Working Paper: How better monetary statistics could have signaled the financial crisis (2010)
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:kan:wpaper:201005

Access Statistics for this paper

More papers in WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Professor Zongwu Cai ().