This study focuses on sweep programs in establishing conceptually appropriate and reliable measures of narrow money. We propose the aggregates M1RS = M1 + holdings of funds swept in retail sweep programs, and M1S = M1RS + holdings of funds swept in commercial demand deposit sweep programs. Based on quarterly observations from 1959:1-2002:4, cointegration tests indicate the existence of long-run relationships between the velocity of M1S and the corresponding opportunity cost of holding money, using either short-term or long-term interest rates. Tests find weaker evidence for M1RS and little support for MZM.
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Economics and Econometrics