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We estimate elasticities of substitution between components of the Bank of England’s household-sector UK Divisia monetary aggregate using quarterly data from 1999 to 2019, encompassing the period surrounding the global financial crisis. The demand system includes interest-bearing sight and time deposits at monetary financial institutions as components, since deposit data for banks (excluding mutuals) and for mutuals are no longer published separately. We find that the elasticities of substitution that relate to changes in the user cost of noninterest-bearing monetary assets imply inelastic substitution over all or almost all of the sample and, consequently, a conventional monetary aggregate would be a highly misleading economic indicator relative to a Divisia monetary aggregate.
Commission 46 continues its task in the triennium, which started in September 2006. It seeks to further contribute to the development and improvement of astronomical education at all levels all over the world through various projects initiated, maintained and to be developed by the Commission, and by disseminating information concerning astronomy education.
Weak separability is a key admissibility property in the Divisia approach to monetary aggregation. We test groups of U.K. household sector monetary assets for weak separability using new data underlying the Bank of England's benchmark revision of its household sector Divisia index. Nonparametric tests are used to identify four monetary asset groupings, which are weakly separable over all or almost all of the post-ERM period (1992:4–2005:1). We construct Divisia monetary aggregates for these four groupings and investigate their information content in two applications. The main findings are that Divisia money has direct effects on aggregate demand and that the growth rates of the nominal Divisia monetary aggregates Granger cause nominal output growth, but not inflation.