Divisia monetary aggregates and US GDP nowcasting

2020 ◽  
Vol 52 (32) ◽  
pp. 3538-3554
Author(s):  
Biyan Tang ◽  
Boniface Yemba ◽  
Dongfeng Chang
Keyword(s):  
Monetary Aggregates ◽  
Divisia Monetary Aggregates

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.

scholarly journals An Extended Series of Divisia Monetary Aggregates

1992 ◽  
Vol 74 (6) ◽  
Author(s):  
Daniel L. Thornton ◽  
Piyu Yue
Keyword(s):  
Monetary Aggregates ◽  
Divisia Monetary Aggregates

scholarly journals The Demand for Simple-sum and Divisia Monetary Aggregates for Pakistan: A Cointegration Approach

1997 ◽  
Vol 36 (3) ◽  
pp. 275-291 ◽  
Author(s):  
Syed Muhammad Tariq ◽  
Kent Matthews
Keyword(s):  
Financial Innovation ◽  
Demand For Money ◽  
Monetary Aggregates ◽  
Developed Economies ◽  
Divisia Monetary Aggregates ◽  
Financial Deregulation ◽  
Sample Stability ◽  
Financial Liberalisation ◽  
Divisia Aggregates ◽  
Statistical Criteria

Financial liberalisation and the advance of financial innovation in a number of developed economies has been blamed for the break-down in the demand for money based on simple sum measures. This break-down has prompted research into Divisia measures of the demand for money. Like many developing countries, Pakistan is going through a period of financial deregulation which goes hand in hand with financial innovation due to increased competition in the banking industry. This paper employs the methodology of cointegration to compare simple-sum and Divisia level estimates of the demand for money for Pakistan for the period 1974Q4 to 1992Q4. Simple sum measures of M1 and M2 were compared with Divisia versions. The paper reports little evidence in support of the superiority of the Divisia monetary aggregates. Both types of measure produce a stable demand for money and perform satisfactorily in post-sample stability tests, although the Divisia measure appears to perform marginally better on conventional statistical criteria. However, our conclusions have to be qualified by the limitations of the data and the knowledge that the period of financial innovation and deregulation has been relatively recent. The policy significance of the results suggests that currently there is no advantage from switching from simple-sum to Divisia aggregates at the existing level of official aggregation as the proper indicator of monetary policy. However, if financial deregulation and innovation continues at the current pace, the Divisia aggregates may in future prove to be the better indicator.

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.

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