The Exact Theoretical Rational Expectations Monetary Aggregate
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Issue Date
2000-06-01Author
Barnett, William A.
Hinich, Melvin J.
Yue, Piyu
Publisher
Cambridge University Press
Type
Article
Article Version
Scholarly/refereed, author accepted manuscript
Published Version
http://journals.cambridge.org/action/displayFulltext?type=1&fid=51748&jid=MDY&volumeId=4&issueId=02&aid=51747&bodyId=&membershipNumber=&societyETOCSession=Metadata
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In aggregation theory, index numbers are judged relative to their ability to track the exact aggregator functions nested within the economy's structure. We compare two statistical index numbers—the Divisia monetary aggregate and the simple-sum monetary aggregate—with the exact rational expectations monetary aggregate, using actual data. Because we are not using simulated data, we estimate the parameters of the Euler equations, and thereby of the nested monetary aggregator function, using the generalized method of moments. We explore the tracking errors of the two index numbers relative to the estimated exact aggregate. We investigate the circumstances under which risk aversion increases tracking error. We also use polyspectral methods to test for the existence of remaining nonlinear structure in the residual tracking errors.
Description
This is the author's accepted manuscript. the original published version may be found at: http://journals.cambridge.org/action/displayFulltext?type=1&fid=51748&jid=MDY&volumeId=4&issueId=02&aid=51747&bodyId=&membershipNumber=&societyETOCSession=
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Citation
Barnett, William A., Hinich Melvin J., and Yue Piyu "The Exact Theoretical Rational Expectations Monetary Aggregate," with Melvin Hinich and Piyu Yue, Macroeconomic Dynamics, June 2000, vol 4, no 2, pp. 197-221.
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