url
21
Jan
2014

Empirical Performance of Monetary Aggregates in BEAC and BCEAO: Data

The Divisia monetary aggregates are computed for each country. Therefore, the regional Divisia monetary aggregates are the sum of national Divisia monetary aggregates. The following variables are used to run empirical investigation especially to construct Divisia monetary aggregates: M1, M2, savings and time savings deposit rates, statutory reserves requirements, the interbank money market, total deposits for each Central Bank.
The other data used in the study are real GDP, inflation. The consumer price index is used to capture inflation. The consumer price index of each Central Bank is a GDP weighted average of national consumer price index. Real GDP of each zone is the sum of real GDP across the members’ countries. Since the data on real GDP are on annual basis, we use the procedure of Goldstein and Khan to obtain quarterly data in each country and these data have been corrected for seasonality. Satisfaction with ATMs

To construct Divisia monetary aggregates, three steps are required: selection of monetary assets, computation of user cost money and the choice of the weighted and aggregation method.
The chosen monetary aggregates are M1 and M2 for BEAC and BCEAO. The composition of the monetary aggregates is as follow:
S M1: currency in circulation + demand deposits
S M2: M1+ saving and time deposits
Following Barnett, the user cost of money is the price of transaction service of each monetary asset. The user cost of each component is proportional to the interest income forgone by holding it rather than a pure store of wealth asset which is an asset that yields a high rate of return but provides no monetary services.
Equation is therefore describes as the real user cost. The user cost of a monetary asset depends on the return of that asset. Currency is seen as pure money and is given a zero rate of return. Demand deposits also bear no explicit interest rate. However, if explicit interest is not paid to depositors, a bank can make indirect payments to customers like making loans to depositors at preferential interest rate, providing free consultations and offering gifts. In this sense, demand deposit can bear an implicit interest rate. Then, to set the user cost of demand deposits, we follow Dahalan et al. They use the implicit rate of return defined by Klein which claims that banks indirectly pay a competitive rate of return to their depositors.
The benchmark rate of return is defined as the maximum expected yield of a pure store of-value asset. This benchmark asset is specifically assumed to provide no liquidity or other monetary service, and is held solely to transfer wealth inter temporally. As explained by Barnett et al, it is included to establish a nonmonetary alternative. Empirically, the interest rate which has the higher return will be taken as the benchmark rate (Dahalan et al, 2005). This is justified by the fact that in theory, the benchmark rate offers the highest return (Serletis and Molik, 2000). Following Binner et al, the inter-bank lending rate is taken as benchmark rate in our study.

The Divisia monetary aggregates are computed for each country. Therefore, the regional Divisia monetary aggregates are the sum of national Divisia monetary aggregates. The following variables are used to run empirical investigation especially to construct Divisia monetary aggregates: M1, M2, savings and time savings deposit rates, statutory reserves requirements, the interbank money market, total deposits for each Central Bank. The other data used in the study are real GDP, inflation. The consumer price index is used to capture inflation. The consumer price index of each Central Bank is a GDP weighted average of national consumer price index. Real GDP of each zone is the sum of real GDP across the members’ countries. Since the data on real GDP are on

About The Author

Kevin J. Brandon

Home | Site Map | Contacts

Copyright © 2013 - 2019 Investment And Finance Online. All rights reserved