Binner, Jane M., Bissoondeeal, Rakesh, Jones, Barry E. and Valcarcel, Victor J. (2025). Identifying monetary policy shocks with Divisia money in the United Kingdom. Macroeconomic Dynamics, 29 , pp. 1-29.
Abstract
We construct a Divisia money measure for U.K. households and private non-financial corporations and a corresponding dual user cost index employing a consistent methodology from 1977 up to the present. Our joint construction of both the Divisia quantity index and the Divisia price dual facilitates an investigation of structural vector autoregresssion models (SVARs) over a long sample period of the type of non-recursive identifications explored by Belongia and Ireland (2016, 2018), as well as the block triangular specification advanced by Keating et al. (2019). An examination of the U.K. economy reveals that structures that consider a short-term interest rate to be the monetary policy indicator generate unremitting price puzzles. In contrast, we find sensible economic responses in various specifications that treat our Divisia measure as the indicator variable.
Publication DOI: | https://doi.org/10.1017/S1365100524000749 |
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Divisions: | College of Business and Social Sciences > Aston Business School > Economics, Finance & Entrepreneurship |
Additional Information: | Copyright © The Author(s), 2025. Published by Cambridge University Press. This is an Open Access article, distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives licence (https://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided that no alterations are made and the original article is properly cited. The written permission of Cambridge University Press must be obtained prior to any commercial use and/or adaptation of the article. |
Uncontrolled Keywords: | Divisia,money supply,user costs,monetary policy,money demand,United Kingdom,structural VAR |
Publication ISSN: | 1469-8056 |
Last Modified: | 07 May 2025 16:01 |
Date Deposited: | 30 Apr 2025 13:32 |
Full Text Link: | |
Related URLs: |
https://www.cam ... CAC38E4EDD7D5E7
(Publisher URL) http://www.scop ... tnerID=8YFLogxK (Scopus URL) |
PURE Output Type: | Article |
Published Date: | 2025-03-31 |
Published Online Date: | 2025-03-31 |
Accepted Date: | 2025-03-01 |
Authors: |
Binner, Jane M.
Bissoondeeal, Rakesh ( ![]() Jones, Barry E. Valcarcel, Victor J. |