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Activity Number:
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578
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Type:
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Invited
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Date/Time:
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Thursday, August 6, 2009 : 10:30 AM to 12:20 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #303175 |
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Title:
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Nonlinear Measurement Errors in Monetary Aggregates
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Author(s):
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William A. Barnett and Marcelle Chauvet*+ and Tierney Heather
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Companies:
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The University of Kansas and University of California, Riverside and College of Charleston
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Address:
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Department of Economics, Riverside, CA, 95251,
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Keywords:
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Measurement Error ; monetary aggregation ; Divisia index ; aggregation
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Abstract:
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Although traditional comparisons of the series sometimes suggest that simple sum and Divisia monetary aggregates share similar dynamics, there are important differences around turning points that cannot be evaluated by their average behavior. This paper compares the different dynamics of the simple sum monetary aggregates and the Divisia monetary aggregate indexes over time, over the business cycle, and across high and low inflation and interest rate phases. We use a factor model with regime switching model that separates out the common movements underlying the monetary aggregate indexes from idiosyncratic variations in each series. We find that the major differences between the simple sum aggregates and Divisia indexes occur around the beginning and end of recessions, and during some high interest rate phases.
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