Barnett, William and Su, Liting (2016): Risk adjustment of the creditcard augmented Divisia monetary aggregates.
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Abstract
While credit cards provide transactions services, as do currency and demand deposits, credit cards have never been included in measures of the money supply. The reason is accounting conventions, which do not permit adding liabilities, such as credit card balances, to assets, such as money. However, economic aggregation theory and index number theory measure service flows and are based on microeconomic theory, not accounting. Barnett, Chauvet, LeivaLeon, and Su (2016) derived the aggregation and index number theory needed to measure the joint services of credit cards and money. They derived and applied the theory under the assumption of risk neutrality. But since credit card interest rates are high and volatile, risk aversion may not be negligible. We extend the theory by removing the assumption of risk neutrality to permit risk aversion in the decision of the representative consumer.
Item Type:  MPRA Paper 

Original Title:  Risk adjustment of the creditcard augmented Divisia monetary aggregates 
Language:  English 
Keywords:  Credit Cards, Money, Credit, Aggregation, Monetary Aggregation, Index Number Theory, Divisia Index, Risk, Euler Equations, Asset Pricing. 
Subjects:  C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C43  Index Numbers and Aggregation C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C53  Forecasting and Prediction Methods ; Simulation Methods C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C58  Financial Econometrics E  Macroeconomics and Monetary Economics > E1  General Aggregative Models E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E40  General E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E41  Demand for Money E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E51  Money Supply ; Credit ; Money Multipliers E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E52  Monetary Policy E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E58  Central Banks and Their Policies G  Financial Economics > G1  General Financial Markets > G17  Financial Forecasting and Simulation 
Item ID:  73385 
Depositing User:  William A. Barnett 
Date Deposited:  29 Aug 2016 17:26 
Last Modified:  29 Aug 2016 17:26 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/73385 
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Risk adjustment of the creditcard augmented Divisia monetary aggregates. (deposited 22 Aug 2016 15:24)
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