Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/306723 
Year of Publication: 
2022
Citation: 
[Journal:] CBN Journal of Applied Statistics [ISSN:] 2476-8472 [Volume:] 13 [Issue:] 1 [Year:] 2022 [Pages:] 163-207
Publisher: 
The Central Bank of Nigeria, Abuja
Abstract: 
This study computes Divisia monetary aggregates DM1, DM2, and DM3 for Nige- ria using the Tornqvist-Theil quantity index for the period 2007M12 to 2020M12 and evaluates the performance of the higher-order aggregate (DM3) with a corre- sponding higher aggregate of the simple sum broad money supply (M3). Applying the indicators to money demand function the results showed that DM3 performed better than the matching simple sum measure M3 due to its faster convergence rate. This is because the Divisia aggregates contain additional information in the form of user-costs and spending shares that are not considered in the compilation of the traditional measure, information that may be important for the proper execution of monetary policy. It is therefore, recommended that the Divisia broad money index be used as complement to the simple sum broad money supply for policy decisions.
Subjects: 
Cointegration
demand for money
Divisia monetary aggregate
JEL: 
C32
E41
E51
Persistent Identifier of the first edition: 
Document Type: 
Article

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