Beyond the Dollar: Rethinking Money Measurement

EconBuff Podcast #49 with Fernando Colunga

https://www.youtube.com/watch?v=DY6ryYFozZ4

Dr. Fernando Colunga talks with me about using Divisia monetary aggregates to measure how much money is in the economy. Dr. Colunga explains the central problems with current money measurement. We discuss simple sum measures and Dr. Colunga argues that simple sums can be improved upon by weighting the different types of money. We explore liquidity, with Dr. Colunga explaining how Divisia monetary measures apply weights to various categories of money based on their liquidity. Dr. Colunga lays the framework out for how Divisia measures are constructed and describes when simple sum measurements will differ most from Divisia measurements. Finally, we explore how new money measures might impact monetary policy if employed, and how economists are constructing unique Divisia measures for each country. Thumbnail photo credit: Bing AI Image Generation