Recent Monetary Policy and the Divisia Monetary Aggregates

This article explains the currently available capability to use formal statistical index number theory to measure the economy's money supply accurately.The new procedure is illustrated by exploring the tightness of money during the recent three-year period of .monetarist. Federal Reserve policy.When measured by a properly constructed statistical index number, the rate of growth of the money supply is found to have been lower and more volatile than when measured by the official simple sum monetary aggregates.As a result, targeting the simple sum aggregates may have induced a tighter and more volatile policy than was intended.