Abstract
Aggregation theory and index-number theory provide the foundations for official governmental data. However, the monetary quantity aggregates and interest rate aggregates supplied by many central banks are not based on index-number or aggregation theory, but rather are the simple unweighted sums of the component quantities and the quantity-weighted or unweighted arithmetic averages of interest rates. The result has been instability of estimated money demand and supply functions, and a series of ‘puzzles’ in the related applied literature. In contrast, the Divisia monetary aggregates are derived directly from economic index-number theory.
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Barnett, W.A. (2018). Monetary Aggregation. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_2263
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DOI: https://doi.org/10.1057/978-1-349-95189-5_2263
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