The demand for divisia money in a core monetary union
Abstract: Proponents of an aggregation theoretic approach to money demand argue that simple-sum measures do not capture the theoretical notion of money, especially for broad monetary aggregates. European monetary aggregation, which uses indices for monetary services, seems attractive because these indices can account for the imperfect substitutability between different currencies. In this article, Katrin Wesche applies the aggregation theoretic framework to money holdings of European residents and compares the resulting index to simple-sum M3. She concludes that the Divisia index of European monetary services may provide additional insight into money demand during the period of transition to monetary union.
File(s): File format is application/pdf https://files.stlouisfed.org/files/htdocs/publications/review/97/09/9709kw.pdf
Provider: Federal Reserve Bank of St. Louis
Part of Series: Review
Publication Date: 1997