Money, Output, and Prices: Evidence from a New Monetary Aggregate

Julio Rotemberg, John Driscoll and James Poterba

Journal of Business & Economic Statistics, 1995, vol. 13, issue 1, 67-83

Abstract: This paper derives a new utility-based monetary aggregate, the currency-equivalent aggregate. It equals the stock of currency that would be required for households to obtain the liquidity services that they get from their entire collection of monetary assets. This aggregate is derived from preferences assuming that these satisfy a separability assumption in addition to satisfying the requirements for Divisia aggregation. The resulting aggregate remains valid when asset characteristics change and equals the sum of individuals' currency-equivalent holdings. It also predicts output movements better than simple-sum aggregates such as M1 and M2.

Date: 1995
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Related works:
Working Paper: Money, Output, and Prices: Evidence from a New Monetary Aggregate (1991)
Working Paper: Money, Output and Prices: Evidence from A New Monetary Aggregate (1991)
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