Divisia Monetary Aggregates and Monetary Policy in a Small Open Economy
type: CreativeWork
description: The first chapter in my doctoral dissertation is co-authored with my advisor and it has been published in the Journal of Risk and Financial Management, August 2021. This paper applied the formula for user cost price of money and the recently developed credit-card-augmented Divisia monetary aggregates formula to construct monetary service indexes for Singapore. We produced state-of-the-art monetary service indexes from January 1991 to March 2021. We found that Divisia measures behave differently than simple sum measures in the period before the year 2000, when interest rates were high. Credit-card-augmented Divisia monetary services move closely with the conventional Divisia monetary aggregates, since the volume of credit card transactions in Singapore is relatively small compared with other monetary assets. The second chapter uses the constructed Divisia indexes and other data to examine different instruments of monetary policy and their relevance in predicting real economic activity in Singapore. I apply the Hamilton based filter to extract the cyclical component of each time series and compute the cyclical correlation of different targets of monetary policy including interest rate, money supply and exchange rate with output and inflation. I find that while exchange rate and all money measures show a weakly contemporaneous correlation with output and inflation, interest rate is not contemporaneously correlated to either output or inflation. Among different money measures, Divisia always shows a stronger correlation with both output and inflation than simple sum. Credit-card-augmented Divisia is the most informative indicator to predict output and price. To confirm the above statistical findings in a more rigorous framework, the last chapter in my dissertation revisits the issue of money measurement in the context of a small open economy using a recently developed micro founded DSGE model. I extend the New Keynesian model for a small open economy from the work of Fa…
abstract: The first chapter in my doctoral dissertation is co-authored with my advisor and it has been published in the Journal of Risk and Financial Management, August 2021. This paper applied the formula for user cost price of money and the recently developed credit-card-augmented Divisia monetary aggregates formula to construct monetary service indexes for Singapore. We produced state-of-the-art monetary service indexes from January 1991 to March 2021. We found that Divisia measures behave differently than simple sum measures in the period before the year 2000, when interest rates were high. Credit-card-augmented Divisia monetary services move closely with the conventional Divisia monetary aggregates, since the volume of credit card transactions in Singapore is relatively small compared with other monetary assets. The second chapter uses the constructed Divisia indexes and other data to examine different instruments of monetary policy and their relevance in predicting real economic activity in Singapore. I apply the Hamilton based filter to extract the cyclical component of each time series and compute the cyclical correlation of different targets of monetary policy including interest rate, money supply and exchange rate with output and inflation. I find that while exchange rate and all money measures show a weakly contemporaneous correlation with output and inflation, interest rate is not contemporaneously correlated to either output or inflation. Among different money measures, Divisia always shows a stronger correlation with both output and inflation than simple sum. Credit-card-augmented Divisia is the most informative indicator to predict output and price. To confirm the above statistical findings in a more rigorous framework, the last chapter in my dissertation revisits the issue of money measurement in the context of a small open economy using a recently developed micro founded DSGE model. I extend the New Keynesian model for a small open economy from the work of Fa…
author: Nguyen, Van H.
language: en
keywords: Economics, Divisia monetary aggregates, monetary policy analysis, New Keynesian model, open-economy macroeconomics, Singapore, small open economy
date published: 2022-05-31
date modified: 2026-07-24T02:46:52Z
provider: University of Kansas
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Kansas

PropertyValue
property ID: Handle
value: https://hdl.handle.net/1808/35399