Constructing Divisia Monetary Aggregates for the Asian Tigers

William Barnett, JongSoo Lee () and Naowar Mohiuddin
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JongSoo Lee: Department of Economics, University of Kansas, Lawrence, KS 66045, USA
Naowar Mohiuddin: Department of Economics, University of Kansas, Lawrence, KS 66045, USA

JRFM, 2024, vol. 17, issue 10, 1-34

Abstract: This study constructs Divisia monetary aggregates for the “Asian Tigers”—Hong Kong (1999–2024), South Korea (2009–2024), Singapore (1991–2021), and Taiwan (2005–2024)—and assesses whether Divisia monetary aggregates explain nominal GDP better than simple-sum money. Our findings demonstrate that Divisia indices respond more sensitively to economic shocks. For Hong Kong and Taiwan, narrow Divisia money provides the best explanations for fluctuations in nominal GDP. Our results suggest that Divisia monetary aggregates can be beneficial for monetary policy analysis in these territories and underscore the importance of further research into the empirical performance of Divisia monetary aggregates in macroeconomic prediction.

Keywords: divisia index; divisia monetary aggregates; vector error-correction model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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Working Paper: Constructing Divisia Monetary Aggregates for the Asian Tigers (2024)
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