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- Title
A NEW EMPIRICALLY WEIGHTED MONETARY AGGREGATE FOR THE UNITED STATES.
- Authors
Drake, Leigh; Mills, Terence C.
- Abstract
This article uses an approach to long-run modeling proposed by Pesaran, Shin, and Smith (2001) to develop an empirically weighted broad monetary aggregate for the United States and to demonstrate the advantages of this type of aggregate from a monetary policy perspective. The new empirically weighted aggregate performs well in out-of-sample nominal income and inflation forecasting tests, and in respect of the latter is clearly superior to simple sum M2, Divisia M2, and simple sum M2+ (which includes stock and bond mutual funds) over the period 1 991-2001.
- Subjects
UNITED States; EFFECT of inflation on income; PRICE inflation; MONETARY policy; RISK sharing; INVESTMENT products
- Publication
Economic Inquiry, 2005, Vol 43, Issue 1, p138
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1093/ei/cbi010