Interest has increased in recent years in index-number measures of money which weight the different components within each monetary aggregate. Proponents of these index-number measures argue that they should be a more helpful indicator of monetary conditions than the current aggregates which are constructed on a simple-sum basis. This article assesses Divisia measures of money, including the theoretical arguments for the Divisia approach to monetary aggregation. It also describes the construction of a Divisia index for the United Kingdom and the indicator properties of such an index.
Published on
01 June 1993
Divisia measures of money