Compression in monetary user costs in the aftermath of the financial crisis: implications for the Divisia M4 monetary aggregate

Differences in Divisia and simple-sum money arise from appropriate weighing mechanisms in Divisia, which rely on information on the user cost of monetary assets. We show convergence in the growth rate of Divisia M4 and its simple-sum counterpart beginning in early 2009, shortly after the collapse in...

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Bibliographic Details
Published in:Applied economics letters 2016-12, Vol.23 (18), p.1294-1300
Main Authors: Mattson, Ryan S., Valcarcel, Victor J.
Format: Article
Language:English
Subjects:
Aggregates
Costs
Divisia
Economic analysis
Economic crisis
Economic models
financial crisis
money aggregates
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Summary:Differences in Divisia and simple-sum money arise from appropriate weighing mechanisms in Divisia, which rely on information on the user cost of monetary assets. We show convergence in the growth rate of Divisia M4 and its simple-sum counterpart beginning in early 2009, shortly after the collapse in the Federal Funds rate. This phenomenon results from compression in user costs.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504851.2016.1153780