Toward a Bias Corrected Currency Equivalent Index

Barnett, William, Keating, John and Kelly, Logan (2007): Toward a Bias Corrected Currency Equivalent Index. Unpublished.

Abstract

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 equilivant 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
• Additional Information: Under review: Economics Letters
• Institution: Bryant University
• Language: English
• Keywords: Currency Equilivant Index; Monetary Aggregation; Money Stock
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E49 - Other
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