In response to the recent financial crisis, many countries have initiated monetary stimulus packages. Maintaining proper measures of monetary aggregates is of particular importance for such economic policies. However, many central banks worldwide use the simple-sum monetary indexes, which ignore the liquidity characteristics of financial assets. Using the simple-sum indexes can produce misleading information, especially for broad monetary aggregates within which financial assets are not likely to be perfect substitutes.
This book focuses on alternative economic stability indicators, and outlines the methods for constructing proper monetary and financial indicators – known as Divisia indexes. The Divisia monetary indexes are designed to measure accurately the liquidity in the economy by assigning different weights to different financial assets according to their usefulness in transactions. This book is highly relevant to economists interested in monetary policy and the construction of core inflation indicators and proper monetary indexes, in accordance with aggregation and index number theory. This book is the first to publish Divisia-based money supply indexes and core inflation indicators for the Gulf Cooperation Council (GCC) countries and for the Gulf Monetary Union. Researchers who use the financial data published by GCC central banks can use our indexes and findings to examine the interactions among the relevant macro-economic variables.
All Rights Available
William A. Barnett is the Oswald Distinguished Professor of Macroeconomics at the University of Kansas and Director of the Center for Financial Stability in New York City. He is editor of the Cambridge University Press journal, Macroeconomic Dynamics. He recently published the book Getting It Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy (MIT Press). The book won the American Publishers Award for Professional and Scholarly Excellence for the best book published in economics during 2012. With Nobel Laureate Paul Samuelson, he also co-authored the book, Inside the Economist’s Mind, translated into seven languages.Ryadh M. Alkhareif is an Economic Specialist at the Saudi Arabian Monetary Agency (SAMA). Prior to joining SAMA, he has worked at the Saudi Ministry of Finance and Economics. He achieved a double master’s degree in Economics from both the University of Oregon and the University of Kansas. He received his doctorate in Economics from University of Kansas. He has participated in the Leadership in Financial Organization program from the Business School at Harvard University. In addition, he has successfully completed various executive programs at the Sloan School of Management at MIT.