The Optimal Level of Monetary Aggregation in the UK

Thomas Elger (), Barry Edward Jones (), David Edgerton () and Jane Binner ()
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Jane Binner: Aston University, Postal: Aston Business School, Aston University, Aston Triangle, Birmingham B4 7ET, United Kingdom

No 2004:7, Working Papers from Lund University, Department of Economics

Abstract: This paper tests the weak separability of the assets in the Bank of England's household-sector Divisia index from 1977Q1 to 2000Q4. The study is based on a revealed preference framework and uses a nonparametric procedure that jointly tests necessary and sufficient conditions for weak separability, allows for incomplete adjustment of expenditure on monetary services, and allows for measurement errors in the monetary quantity data. The assets included in the Bank of England Divisia index are weakly separable with complete adjustment in two sub-samples covering most of the eighties. A narrower aggregate is weakly separable with complete adjustment in each sub-sample we investigated.

Keywords: weak separability; incomplete adjustment; measurement error (search for similar items in EconPapers)
JEL-codes: C43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2004-03-09
Note: This paper has been published as "A Note on the Optimal Level of Monetary Aggregation in the UK."
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Published in Macroeconomic Dynamics, 2008, pages 117-131.

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