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Working Paper 1985-010A

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"Weighted Monetary Aggregates As Intermediate Targets"
by Dallas S. Batten, and Daniel L. Thornton

Recent financial innovation and deregulation has resulted in a number of weighted monetary aggregates being proposed for the conduct of monetary policy. This article argues that form a policy perspective one is not solely interested in a monetary aggregate that "correctly" measures the monetary services to society but, more importantly, the aggregate should be strongly related to the ultimate goal variables of policy but not subject to feedback from these variables. Empirical tests indicates that such an aggregate can be composed if the assets in M1 and that none of the alternatives proposed show any marked superiority over the simple-sum aggregate.

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Category > Monetary Policy/Macroeconomics
Author > Daniel L. Thornton