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U.S. NARROW MONEY FOR THE TWENTY‐FIRST CENTURY
Author(s) -
DUTKOWSKY DONALD H.,
CYNAMON BARRY Z.,
JONES BARRY E.
Publication year - 2006
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbi056
Subject(s) - cointegration , economics , monetary economics , term (time) , econometrics , microeconomics , keynesian economics , macroeconomics , quantum mechanics , physics
This study focuses on sweep programs in establishing conceptually appropriate and reliable measures of narrow money. We propose the aggregates M1RS = M1 + holdings of funds swept in retail sweep programs, and M1S = M1RS + holdings of funds swept in commercial demand deposit sweep programs. Based on quarterly observations from 1959:1–2002:4, cointegration tests indicate the existence of long‐run relationships between the velocity of M1S and the corresponding opportunity cost of holding money, using either short‐term or long‐term interest rates. Tests find weaker evidence for M1RS and little support for MZM. (JEL E41 , G21 )