The Microeconomic Foundations of the Definition of Money
In the discussion to this point, we have used the word ‘money’ as though it were obvious what it means, but this is not the case. Currently, the common practice among central banks is to construct money measures from a list of possible components by simply adding together those that are considered to be the likely sources of monetary services. These are usually highly liquid financial assets, and the approach is referred to in the literature as that of simple-sum aggregation.
KeywordsUser Cost Monetary Aggregate Quantity Index Aggregator Function Aggregation Theory
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