Bounding an Economic Monetary Aggregate under Nonhomothetic Preferences

James L Swofford and Gerald A Whitney

Journal of Business & Economic Statistics, 1990, vol. 8, issue 1, 137-41

Abstract: We construct nonparametric bounds on true-quantity indexes for the realistic case of nonhomothetic preferences. These bounds do not require assumptions about the form of the underlying aggregator function. We construct these bounds using monetary assets that meet necessary conditions for the existence of an aggregate. We find that a Tornqvist index of these monetary assets falls within the nonparametric bounds on true-quantity indexes almost all of the time, whereas a simple sum of these monetary assets falls outside these bounds more than one-third of the time.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:bes:jnlbes:v:8:y:1990:i:1:p:137-41

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