Journal Article

A new monetary aggregate

Abstract: During the past two decades, financial innovations have proceeded at a rapid pace. These innovations have altered the liquidity of some assets relative to that of others. As a result, traditional measures of the money supply may have become less reliable as measures of household liquidity. Even sophisticated measures of the money supply, such as the Divisia monetary aggregates, do not adequately adjust for the effects of changes in the payments technology. ; Koenig and Fomby propose a measure of the money supply that avoids some of the shortcomings of existing monetary aggregates. The behavior of the new measure suggests that monetary policy during the late 1970s and early 1980s was substantially less expansionary than the corresponding traditional and Divisia aggregates might lead one to believe.

Keywords: Money supply; Monetary policy;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1990

Issue: May

Pages: 1-15