THE CASE FOR DIVISIA MONEY TARGETING

2012 ◽  
Vol 17 (8) ◽  
pp. 1638-1658 ◽  
Author(s):  
Apostolos Serletis ◽  
Sajjadur Rahman
Keyword(s):  
Economic Activity ◽  
The United States ◽  
Money Growth ◽  
Monetary Policies ◽  
Average Growth ◽  
Monetary Aggregates ◽  
Method Of Calculation ◽  
Divisia Monetary Aggregates ◽  
Level Of Aggregation ◽  
Growth Volatility

In this paper we investigate the relationship between money growth uncertainty and the level of economic activity in the United States. We pay explicit attention to the Divisia monetary aggregates. In doing so, we use the new vintage of the data [called MSI (monetary services indices) by the St. Louis Fed], together with the simple sum monetary aggregates, over the period from 1967:1 to 2011:3. In the context of a bivariate VARMA, GARCH-in-mean, asymmetric BEKK model, we show that increased Divisia money growth volatility (irrespective of the level of aggregation and the method of calculation) is associated with a lower average growth rate of real economic activity. However, there are no effects of simple-sum money growth volatility on real economic activity, except with the Sum M1 and perhaps Sum M2M aggregates. We conclude that monetary policies that focus on the Divisia monetary aggregates and target their growth rates will contribute to higher overall economic growth.

Money growth variability and output: evidence with credit card-augmented Divisia monetary aggregates

2020 ◽  
Vol 24 (5) ◽  
Author(s):  
Jinan Liu ◽  
Apostolos Serletis
Keyword(s):  
Financial Stability ◽  
Credit Card ◽  
Negative Impact ◽  
Balance Sheet ◽  
Credit Cards ◽  
Money Growth ◽  
Monetary Policies ◽  
Growth Variability ◽  
Significant Negative Impact ◽  
Growth Volatility

Abstract We reexamine the effects of the variability of money growth on output, raised by Mascaro and Meltzer (1983), in the era of the increasing use of alternative payments, such as credit cards. Using a bivariate VARMA, GARCH-in-Mean, asymmetric BEKK model, we find that the volatility of the credit card-augmented Divisia M4 monetary aggregate has a statistically significant negative impact on output from 2006:7 to 2019:3. However, there is no effect of the traditional Divisia M4 growth volatility on real economic activity. We conclude that the balance sheet targeting monetary policies after the financial crisis in 2007–2009 should pay more attention on the broad credit card-augmented Divisia M4 aggregate to address economic and financial stability.

scholarly journals Money Neutrality, Monetary Aggregates and Machine Learning

Algorithms ◽  
2019 ◽  
Vol 12 (7) ◽  
pp. 137 ◽  
Author(s):  
Periklis Gogas ◽  
Theophilos Papadimitriou ◽  
Emmanouil Sofianos
Keyword(s):  
Machine Learning ◽  
Economic Activity ◽  
Central Banks ◽  
Support Vector ◽  
Short Term ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates ◽  
Vector Machines ◽  
The World ◽  
Short Run

The issue of whether or not money affects real economic activity (money neutrality) has attracted significant empirical attention over the last five decades. If money is neutral even in the short-run, then monetary policy is ineffective and its role limited. If money matters, it will be able to forecast real economic activity. In this study, we test the traditional simple sum monetary aggregates that are commonly used by central banks all over the world and also the theoretically correct Divisia monetary aggregates proposed by the Barnett Critique (Chrystal and MacDonald, 1994; Belongia and Ireland, 2014), both in three levels of aggregation: M1, M2, and M3. We use them to directionally forecast the Eurocoin index: A monthly index that measures the growth rate of the euro area GDP. The data span from January 2001 to June 2018. The forecasting methodology we employ is support vector machines (SVM) from the area of machine learning. The empirical results show that: (a) The Divisia monetary aggregates outperform the simple sum ones and (b) both monetary aggregates can directionally forecast the Eurocoin index reaching the highest accuracy of 82.05% providing evidence against money neutrality even in the short term.

INTEREST RATES, MONEY, AND ECONOMIC ACTIVITY

2019 ◽  
pp. 1-50 ◽  
Author(s):  
Cosmas Dery ◽  
Apostolos Serletis
Keyword(s):  
Interest Rates ◽  
Industrial Production ◽  
Economic Activity ◽  
Structural Vector Autoregression ◽  
Structural Shocks ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates ◽  
Economic Statistics ◽  
Cyclical Component ◽  
Comprehensive Comparison

In this paper, we are motivated by the fact that little is known about the relative performance of broad and narrow Divisia monetary aggregates, and by recent work that tests and rejects the appropriateness of the aggregation assumptions that underlie the various monetary aggregates published by the Federal Reserve as well as a large number of monetary asset groupings suggested by earlier studies. We present a comprehensive comparison of narrow versus broad Divisia monetary aggregates within three classes of empirical models. We compute correlations between the cyclical components of Divisia monetary aggregates at different levels of aggregation and the cyclical component of industrial production. We test for Granger causality running from the Divisia aggregates to industrial production and various other measures of real economic activity. We also reestimate a structural vector autoregression based on earlier work by Leeper and Roush [(2003) Journal of Money, Credit, and Banking 35, 1217–1256] and Belongia and Ireland [(2015) Journal of Business and Economic Statistics 33, 255–269; (2016) Journal of Money, Credit and Banking 48, 1223–1266], modifying that earlier work using monthly rather than quarterly data and extending it, both using broad as well as narrower Divisia monetary aggregates and by allowing for Generalized autoregressive conditional heteroskedasticity (GARCH) behavior in the structural shocks.

MONETARY NEUTRALITY

2017 ◽  
Vol 23 (06) ◽  
pp. 2133-2149 ◽  
Author(s):  
Apostolos Serletis ◽  
Zisimos Koustas
Keyword(s):  
United States ◽  
Financial Stability ◽  
The United States ◽  
Macroeconomic Theory ◽  
Quarterly Data ◽  
Significant Evidence ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates ◽  
Long Run ◽  
Monetary Neutrality

We test the long-run neutrality of money proposition for the United States paying attention to the integration and cointegration properties of the variables. We use quarterly data (over the period from 1967:1 to 2014:1) and the new Center for Financial Stability Divisia monetary aggregates. We make a comparison among the narrower monetary aggregates, M1, M2M, MZM, M2, and ALL, and the broad monetary aggregates, M4+, M4-, and M3, and show that there is no statistically significant evidence against long-run monetary neutrality, consistent with both monetarist and Keynesian macroeconomic theory.

scholarly journals Constructing Divisia Monetary Aggregates for Singapore

2021 ◽  
Vol 14 (8) ◽  
pp. 370
Author(s):  
William A. Barnett ◽  
Van H. Nguyen
Keyword(s):  
Interest Rates ◽  
Economic Activity ◽  
Credit Card ◽  
Index Number ◽  
User Cost ◽  
Monetary Aggregates ◽  
Divisia Monetary Aggregates ◽  
Index Number Theory ◽  
Future Work ◽  
Year 2000

Since Barnett derived the user cost price of money, the economic theory of monetary services aggregation has been developed and extended into a field of its own with solid foundations in microeconomic theory. Divisia monetary aggregates have repeatedly been shown to be strictly preferable to their simple sum counterparts, which have no competent foundations in microeconomic aggregation or index number theory. However, most central banks in the world, including that of Singapore, the Monetary Authority of Singapore (MAS), still report their monetary aggregates as simple summations. Recent macroeconomic research about Singapore tends to focus on exchange rates as a monetary policy target but ignores the aggregate quantity of money. Is that because quantities of money are irrelevant to economic activity? To examine the role of monetary quantities as potential monetary instruments, indicators, or targets and their relevance to predicting real economic activity in Singapore, this paper applies the user cost of money formula and the recently developed credit-card-augmented Divisia monetary aggregates formula to construct monetary services indexes for Singapore. We produce those state-of-the-art monetary services indexes from Jan 1991 to Mar 2021. We see that Divisia measures behave differently from simple sum measures in the period before the year 2000, while interest rates were high. Credit-card-augmented Divisia monetary services move closely with the conventional Divisia monetary aggregates, since the volume of credit card transactions in Singapore is relatively small compared with other monetary service assets. In future work, we plan to use our data to explore central bank policy in Singapore and to propose improvements in that policy. By making our data available to the public, we encourage others to do the same.

scholarly journals Neo-Globalization: Premises, Processes and the Future

2017 ◽  
Vol 4 (7) ◽  
pp. 71
Author(s):  
M S S El Namaki
Keyword(s):  
Economic Growth ◽  
Economic Policy ◽  
Government Spending ◽  
Economic Activity ◽  
Free Market ◽  
The United States ◽  
Monetary Policies ◽  
Wearing Off ◽  
Wealth Tax ◽  
High Measure

Globalization, or the worldwide movement towards a high measure of economic, financial, trade, technology and communications integration, is a concept in need of an overhaul. The roots which have rested largely on President Reagan’s economic policy foundations of the early 80’s are wearing off. Free market, deregulation, income and wealth tax cut, reduced government spending and tight fiscal and monetary policies are challenged by events and disruptions. Economic growth vehicles are shifting away from manufacturing and services and locus of economic activity is moving towards China and its environs. Progression towards protective politics in the United States as much as the adoption of Brexit in Britain have hastened the blur.

The United States as the Trade Partner of Poland in te Context of the Transatlantic Trade and Investment Partnership (TTIP)

2014 ◽  
Vol 9 (3) ◽  
pp. 201-213
Author(s):  
Renata Marks-Bielska ◽  
Wiesława Lizińska ◽  
Izabela Serocka
Keyword(s):  
Growth Rate ◽  
Foreign Trade ◽  
The United States ◽  
Average Growth ◽  
Transatlantic Trade ◽  
Central Statistical ◽  
The Usa ◽  
Central Statistical Office ◽  
Trade Partner ◽  
Structure Of Trade

Evaluation of the importance of the USA as the trade partner of Poland is the main objective of the paper, based on the changes in the value of trade during the years 2000-2012 and changes in the structure of trade during the years 2008-2012. The data from the Statistical Yearbooks of Foreign Trade published by the Central Statistical Office was used. The potential for foreign trade growth was illustrated using the simplified analysis based on the gravity model of foreign trade concept. Gradually increasing value of Polish trade with the USA (the average growth rate 9.8%, EU-15 countries 13.1%). Polish exports are characterised by a higher than imports growth rate (USA - exports growth by 12.5%, imports 9.2%, EU-15 - exports 15.1%, imports 11.6%). Trade is strongly dominated by position of one group of products (over 30% share in both exports and imports). The potential of trade is poorly exploited currently. Trade was focused mainly on the countries situated in the close neighbourhood (mainly the EU countries with the domination of Germany).

scholarly journals Nighttime Lights and County-Level Economic Activity in the United States: 2001 to 2019

2021 ◽  
Vol 13 (14) ◽  
pp. 2741
Author(s):  
John Gibson ◽  
Geua Boe-Gibson
Keyword(s):  
Time Series ◽  
Economic Activity ◽  
Validation Studies ◽  
National Level ◽  
Predictive Performance ◽  
The United States ◽  
Cross Sectional ◽  
Nation States ◽  
Nighttime Lights ◽  
Defense Meteorological Satellite Program

Nighttime lights (NTL) are a popular type of data for evaluating economic performance of regions and economic impacts of various shocks and interventions. Several validation studies use traditional statistics on economic activity like national or regional gross domestic product (GDP) as a benchmark to evaluate the usefulness of NTL data. Many of these studies rely on dated and imprecise Defense Meteorological Satellite Program (DMSP) data and use aggregated units such as nation-states or the first sub-national level. However, applied researchers who draw support from validation studies to justify their use of NTL data as a proxy for economic activity increasingly focus on smaller and lower level spatial units. This study uses a 2001–19 time-series of GDP for over 3100 U.S. counties as a benchmark to examine the performance of the recently released version 2 VIIRS nighttime lights (V.2 VNL) products as proxies for local economic activity. Contrasts were made between cross-sectional predictions for GDP differences between areas and time-series predictions of GDP changes within areas. Disaggregated GDP data for various industries were used to examine the types of economic activity best proxied by NTL data. Comparisons were also made with the predictive performance of earlier NTL data products and at different levels of spatial aggregation.

scholarly journals The Global Domain of the Dollar: Eight Questions

2020 ◽  
Vol 48 (4) ◽  
pp. 421-429
Author(s):  
Robert N. McCauley
Keyword(s):  
Economic Activity ◽  
Balance Sheet ◽  
The United States ◽  
Fiscal Deficits ◽  
Exorbitant Privilege ◽  
The World ◽  
World Economic ◽  
Dollar Debt ◽  
The 1960S ◽  
The U.S

Abstract Since the late 1950s, the rest of the world has come to use the dollar to an extent that justifies speaking of the dollar’s global domain. The rest of the world denominates much debt in U.S. dollars, extending U.S. monetary policy’s sway. In addition, in outstanding foreign exchange deals, the rest of the world has undertaken to pay still more in U.S. dollars: off-balance-sheet dollar debts buried in footnotes. Consistent with the scale of dollar debt, most of the world economic activity takes place in countries with currencies tied to or relatively stable against the dollar, forming a dollar zone much larger than the euro zone. Even though the dollar assets of the world (minus the United States) exceed dollar liabilities, corporate sector dollar debts seem to make dollar appreciation akin to a global tightening of credit. Since the 1960s, claims that the dollar’s global role suffers from instability and confers great benefits on the U.S. economy have attracted much support. However, evidence that demand for dollars from official reserve managers forces unsustainable U.S. current account or fiscal deficits is not strong. The so-called exorbitant privilege is small or shared. In 2008 and again in 2020, the Federal Reserve demonstrated a willingness and capacity to backstop the global domain of the dollar. Politics could constrain the Fed’s ability to backstop the growing share of the domain of the dollar accounted for by countries that are not on such friendly terms with the U.S.

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