The New CFS Divisia Monetary Aggregates: Design, Construction, and Data Sources
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Frequently Asked Questions (7)
Q2. What is the method to calculate the growth rate of a broad aggregate?
If monthly growth rates are desired, the monthly levels of the Divisia aggregates can be used to compute the month-over-month growth rate, since all of their quantity data are seasonally adjusted.
Q3. What is the level of cumulative sweeps provided by FRED?
Let DD be demand deposits, DDS be sweeps-adjusted demand deposits, OCDC be othercheckable deposits at commercial banks (interest bearing checking accounts), OCDCS be the sweepadjusted OCDC, OCDT be other checkable deposits at thrift institutions, OCDTS be the sweeps-adjusted OCDT, and CD be the level of cumulative sweeps provided by FRED.
Q4. What is the name of the new Divisia monetary aggregates?
The St. Louis Federal Reserve admirably initiated and maintains the five narrow Divisia monetary aggregates for the US and calls them MSI (monetary services indexes), in accordance with the theory and formulas derived by Barnett (1980).
Q5. What is the difference between the two aggregates?
These aggregates are meant to substitute for the now discontinued Federal-Reserve simple-sum L aggregate, but with proper aggregation-theoretic weighting of the components, as opposed to the former simple-sum aggregation, which produced a greatly distorted measure of the economy’s liquidity, by weighting all components the same as legal means of payment.
Q6. Why do the authors not compensate their narrow Divisia monetary aggregates for commercial sweeps?
Because of lack of data, the authors have not compensated their narrow Divisia monetary aggregates for commercial sweeps, and the authors do recommend the use of broad aggregates to offset the problem.
Q7. What is the difference between the benchmark rate and the upper envelope?
But the benchmark rate normally should exceed that upper envelope, since the benchmark rate is a proxy for a shadow rate having no liquidity, being the theoretical rate of return on pure capital producing no services other than investment yield.