How better monetary statistics could have signaled the financial crisis

William Barnett and Marcelle Chauvet

MPRA Paper from University Library of Munich, Germany

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)
Date: 2010-06-15
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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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)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:24721

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