Kelly, Logan and Barnett, William A. and Keating, John (2007): Toward a Bias Corrected Currency Equivalent Index.
Download (227kB) | Preview
Measuring the economic stock of money, defined to be the present value of current and future monetary service flows, is a difficult asset pricing problem, because most monetary assets yield interest. Thus, an interest yielding monetary asset is a joint product: a durable good providing a monetary service flow and a financial asset yielding a return. The currency equivalent index provides an elegant solution, but it does so by making strong assumptions about expectations of future monetary service flows. These assumptions cause the currency equivalent index to exhibit significant downward bias. In this paper, we propose an extension to the currency equivalent index that will correct for a significant amount of this bias.
|Item Type:||MPRA Paper|
|Original Title:||Toward a Bias Corrected Currency Equivalent Index|
|Keywords:||Currency Equivalent Index; Monetary Aggregation; Money Stock|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E49 - Other
C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C43 - Index Numbers and Aggregation
|Depositing User:||Logan Kelly|
|Date Deposited:||10. Sep 2007|
|Last Modified:||19. Feb 2013 01:42|
Arrow, K. J. & Hahn, G. H. (1971), General Competitive Analysis, San Francisco: Holden-Day.
Barnett, W. A. (1995),Exact Aggregation Under Risk, in William A. Barnett; Maurice Salles; Hervé Moulin & Norman Schofield, ed.,'Social Choice, Welfare and Ethics', Cambridge University Press, , pp. 353-374. Reprinted in The Theory of Monetary Aggregation. North-Holland.
Barnett, W. A. (1991),A Reply to Julio J. Rotemberg, in Michael T. Belongia, ed.,'Monetary Policy on the 75th Anniversary of the Federal Reserve System.', Kluwer, , pp. 189-222. Reprinted in The Theory of Monetary Aggregation. North-Holland.
Barnett, W. A. (1978), 'The User Cost of Money', Economics Letters 1(2), Reprinted in The Theory of Monetary Aggregation. North-Holland.
Barnett, W. A.; Chae, U. & Keating, J. W. (2005), 'The Discounted Economic Stock of Money with VAR Forecasting', Annals of Finance 2(2), 229-258.
Barnett, W. A.; Liu, Y. & Jensen, M. (1997), 'CAPM Risk Adjustment for Exact Aggregation Over Financial Assets', Macroeconomic Dynamics 1(2), 485-512. Reprinted in the Theory of Monetary Aggregation. North-Holland.
Blanchard, O. J. & Fischer, S. (1989), Lectures on Macroeconomics, Cambridge: MIT Press.
Cochrane, J. H. (2005), Asset Pricing Revised Edition, Princeton:Princeton University Press.
Doornik, J. A. (2006), Ox-An Object Oriented Matrix Programming Language, London: Timberlake Consultants Press and Oxford: www.doornik.com.
Hutt, W. H. (1963), Keynesianism - Retrospect and Prospect, Chicago: Regnery.
Rotemberg, J.; Driscoll, J. & Poterba, J. (1995), 'Money, Output, and Prices: Evidence from a New Monetary Aggregate', Journal of Business and Economic Statistics 13(1), 67-83.
Available Versions of this Item
- Toward a Bias Corrected Currency Equivalent Index. (deposited 10. Sep 2007) [Currently Displayed]