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Int. J. Financial Stud. 2015, 3(1), 49-55; doi:10.3390/ijfs3010049

Modern and Traditional Methods for Measuring Money Supply: The Case of Saudi Arabia

1
Department of Economics, University of Kansas, Lawrence, KS 66045-7585, USA
2
Center for Financial Stability, New York, NY 10036, USA
3
Saudi Arabian Monetary Agency, Riyadh 11169, Saudi Arabia
*
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 15 January 2015 / Revised: 12 February 2015 / Accepted: 16 February 2015 / Published: 25 February 2015
View Full-Text   |   Download PDF [150 KB, uploaded 25 February 2015]   |  

Abstract

This paper compares the “simple-sum” monetary aggregates (M1 and M2) published by the Saudi Arabian Monetary Agency (SAMA) with the new monetary aggregates (D1 and D2)—known as the Divisia monetary indexes. The former aggregates are constructed from a simple accounting identity, whereas the Divisia aggregates are constructed using statistical index number theory and aggregation theory. The findings suggest that both D1 and M1 are identical, given the perfect substitutability of the monetary components within those aggregates. For the broader monetary aggregates where perfect substitutability assumption is not realistic, the two monetary indexes differ substantially. SAMA could benefit by using both monetary indexes simultaneously to better monitor liquidity in the market. View Full-Text
Keywords: monetary aggregation; Divisia monetary aggregates; index number theory monetary aggregation; Divisia monetary aggregates; index number theory
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Barnett, W.A.; Alkhareif, R.M. Modern and Traditional Methods for Measuring Money Supply: The Case of Saudi Arabia. Int. J. Financial Stud. 2015, 3, 49-55.

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