A Divisia user cost of money for emerging economies

monetarypolicyconferenceadmin — Fri, 09 Feb 2018 16:15:48 +0000

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.

User Cost of Money – Monetary Policy after the Global Crisis

A Divisia user cost of money for emerging economies