CURRENCY EQUIVALENT MONETARY AGGREGATES - DO THEY HAVE AN EDGE COVER THEIR SIMPLE SUM COUNTERPARTS

This paper attempts an empirical evaluation of a new monetary aggregat e called the currency equivalent monetary aggregate (CEMA) by consider ing four assets, vis., currency with the public, net demand deposits w ith the banks, net time deposits with the banks, and post office savin gs deposits. The performance of CEMA in relation to simple sum aggrega tes is evaluated in terms of some standard tests such as the J-test, i nformation content test, and the money demand test. The results sugges t that the currency equivalent monetary aggregate has a clear edge ove r its simple sum counterpart.