Monetary Aggregation Theory and Statistical Index Numbers

This paper is the first of two from the Monetary Services Indices (MSI) Project at the Federal Reserve Bank ofSt. Louis. The second paper, Working Paper 96-008B, summarizes the methodology, construction and data sourcesfor the an extensive new database of monetary services indices, often referred to as Divisia monetary aggregates, for the United States. This paper surveys the microeconomic theory of the aggregation of monetary assets, bringing together results that are not otherwise readily available in a single source. In addition to indices of the flow ofmonetary services, the Project’s database contains dual user cost indices, measures of potential aggregation error in the monetary services indices, and measures of the stock of monetary wealth. An overview of the Project and the concept ofmonetary aggregation is included here as a preface. JEL CLASSIFICATION: C43, C82, E51