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Sectorial economic activity and Divisia monetary aggregates

Published online by Cambridge University Press:  24 September 2024

Cosmas Dery Open the ORCID record for Cosmas Dery [Opens in a new window]
Cosmas Dery*
Affiliation:
Department of Economics and International Business, Sam Houston State University, Huntsville, TX, USA
*
Email: cdery@shsu.edu
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Abstract

This paper assesses the information content and predictive capabilities of Divisia monetary indicators concerning sector-specific economic activities. Although existing evidence strongly supports the informative nature and predictive potential of various Divisia indicators at an aggregate level, studies focusing on Divisia information content for specific industries are notably sparse. Sector-level data provide a more detailed insight into economic and labor market dynamics. By analyzing comprehensive sector-specific data on real GDP, value added, employment, and unemployment rates across thirteen diverse sectors in the United States, this paper investigates the predictive abilities of narrow and broad Divisia money across three categories (original, credit card-augmented, and credit card-augmented inside money). The results show that narrow Divisia money serve as robust predictors of sector-specific economic and labor market indicators, often surpassing the predictive capacity of the conventional Fed funds rate and slightly outperforming broad Divisia measures in relation to these indicators.

Keywords

Divisia monetary aggregatesnarrow moneybroad moneysectorial economic activityE32E37E4E52
Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e34
Copyright
© The Author(s), 2024. Published by Cambridge University Press

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Footnotes

I wish to express my appreciation to the College of Business Administration at Sam Houston State University for generously providing a Summer Research Grant that supported this study. Additionally, I would like to thank William Barnett, Apostolos Serletis, and two anonymous referees for comments that greatly improved the paper.

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