A Divisia user cost of money for emerging economies

Please cite the paper as:
John Nana Francois, Ryan S. Mattson, (2018), A Divisia user cost of money for emerging economies, World Economics Association (WEA) Conferences, No. 1 2018, Monetary Policy after the Global Crisis, 19th February to 20th April, 2018


A growing literature on Divisia monetary aggregation focuses on emerging economies. Sizeable proportions of the populations of these economies face financial accessibility and wealth constraints. We propose a modified user-cost of money in an economic environment where a fraction of consumers are wealth-constrained. The derived user-cost is a weighted average of the subjective user-costs of constrained and unconstrained agent. Our user-cost is consistent with the canonical Barnett (1978) and Barnett (2000) user cost when all agents are not wealth-constrained but accounts for an additional “social” opportunity cost when a fraction of consumers do not have access to wealth.

Keywords: , ,

Recent comments



  • monetarypolicyconferenceadmin says:

    Are you planning to empirically test the model?

  • Ryan Mattson says:

    Yes. We are pushing on the model to be sure we are consistent with the theory before moving on to testing.

    To do that we would also need to construct data sets for emerging economies or economies where the wealth constraint may make a difference in the user costs. South Africa and Mexico for example are two good examples with available data. China would also be ideal if the data is currently available, and I believe some one has worked on building that data set.

  • Jim Swofford says:

    John and Ryan, Is some of what your are getting at is that in less developed countries, some consumers may have a discount rate or a shadow discount rate that is higher than any market rate? Might you want to develop and test a model of discount rates?