NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Money, Output and Prices: Evidence from A New Monetary Aggregate

Julio J. Rotemberg, John C. Driscoll, James M. Poterba

NBER Working Paper No. 3824 (Also Reprint No. r2040)
Issued in August 1991
NBER Program(s):   ME

This paper develops a new utility-based monetary aggregate which we label the currency equivalent aggregate. This aggregate equals the stock of currency that would be required for households to obtain the same liquidity services that they get from their entire collection of monetary assets. We compare the ability of the new aggregate and conventional aggregates, such as Ml and M2, and other indicators of monetary policy to forecast real activity. The CE aggregate has more predictive power for output and prices than standard aggregates, and the time path of the estimated output response is more consistent with broad classes of theoretical models.

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Document Object Identifier (DOI): 10.3386/w3824

Published: Journal of Business and Economic Statistics, 13 (January 1995), pp. 67-83. citation courtesy of

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