The Demand for Assets and Optimal Monetary Aggregation

Apostolos Serletis and Ali Jadidzadeh

No 2018-05, Working Papers from Department of Economics, University of Calgary

Abstract: This paper uses a highly disaggregated demand system to estimate the degree of substitutability among monetary assets and to address the issue of optimal monetary aggregation in the United States. We address the problems of dimensionality and nonlinearity, estimating a very detailed monetary asset demand system encompassing the full range of assets based on the locally ‡exible normalized quadratic (NQ) expenditure function. We treat the con- cavity property as a maintained hypothesis and provide evidence consistent with neoclassical microeconomic theory. Statistical tests reject the appropri- ateness of the aggregation assumptions for all the money measures published by the Federal Reserve as well as for a large number of groupings suggested by earlier studies. This supports and reinforces Barnett’s (2016) assertion that we should employ the broadest M4 monetary aggregate published by the Center for Financial Stability.

Keywords: Barnett critique; Divisia monetary aggregates; Demand for money; Separability. (search for similar items in EconPapers)
JEL-codes: C13 C3 C51 (search for similar items in EconPapers)
Date: 2018-06-26
References: Add references at CitEc
Citations: View citations in EconPapers (5)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: The Demand for Assets and Optimal Monetary Aggregation (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:clg:wpaper:2018-05

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Calgary Contact information at EDIRC.
Bibliographic data for series maintained by Department of Economics ().