The New Divisia Monetary Aggregates

Barnett's Divisia monetary aggregates were derived to be elements of Diewert's class of superlative quantity index numbers. Relative to aggregation theory, Barnett's resulting monetary aggregates are strictly preferable to the official sum monetary aggregates, since the component monetary assets are not perfect substitutes. Formal empirical tests based on the relevant aggregation-theoretic criteria have likewise uniformly favored the Divisia monetary aggregates. The current article compares the Divisia with the sum monetary aggregates relative to numerous conventional policy-relevant criteria. The Divisia monetary aggregates, especially at high levels of aggregation, usually perform best in these tests.