The Discounted Economic Stock of Money with VAR Forecasting

William Barnett, Unja Chae and John W. Keating

Chapter 4 in Financial Aggregation and Index Number Theory, 2011, pp 107-150 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractWe measure the economic capital stock of money implied by the Divisia monetary aggregate service flow, in a manner consistent with asset pricing theory. Based on Barnett's (1991) definition of the economic stock of money, we estimate the expected discounted flow of expenditure on the services of monetary assets, where expenditure on monetary services is evaluated at the user costs of the monetary components. We use forecasts based on martingale expectations, asymmetric vector autoregressive expectations, and the Bayesian vector autoregressive expectations. We find the resulting capital-stock index to be surprisingly robust to the modeling of expectations.

Keywords: Index Number Theory; Aggregation Theory; Money; Financial Assets; Monetary Aggregates (search for similar items in EconPapers)
Date: 2011
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Related works:
Journal Article: The Discounted Economic Stock of Money with VAR Forecasting (2006)
Working Paper: The discounted economic stock of money with VAR forecasting (2006)
Working Paper: The Discounted Economic Stock of Money with VAR Forecasting (2005)
Working Paper: The Discounted Economic Stock of Money with VAR Forecasting (2005)
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