How better monetary statistics could have signaled the financial crisis
This paper explores the disconnect of Federal Reserve data from index number theory. A consequence could have been the decreased-systemic-risk misperceptions that contributed to excess risk-taking prior to the housing bust. We find that most recessions in the past 50 years were preceded by more contractionary monetary policy than indicated by simple-sum monetary data. Divisia monetary aggregate growth rates were generally lower than simple-sum aggregate growth rates in the period preceding the Great Moderation, and higher since the mid 1980s. Monetary policy was more contractionary than likely intended before the 2001 recession and more expansionary than likely intended during the subsequent recovery.
Year of publication: |
2011
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Authors: | Barnett, William A. ; Chauvet, Marcelle |
Published in: |
Journal of Econometrics. - Elsevier, ISSN 0304-4076. - Vol. 161.2011, 1, p. 6-23
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Publisher: |
Elsevier |
Keywords: | Measurement error Monetary aggregation Divisia index Aggregation Monetary policy Index number theory Financial crisis Great moderation Federal Reserve |
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