Journal Article

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.

Keywords: European Monetary System (Organization); Monetary policy; Banks and banking, Central; European Central Bank;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 1997

Issue: Sep

Pages: 51-60