Divisia monetary aggregates

In econometrics and official statistics, and particularly in banking, the Divisia monetary aggregates index is an index of money supply. It is a particular application of a Divisia index to monetary aggregates.

The monetary aggregates used by most central banks (notably the US Federal Reserve) are simple-sum indexes in which all monetary components are assigned the same weight:

in which ${\displaystyle x_{jt}}$ is one of the ${\displaystyle n}$ monetary components of the monetary aggregate ${\displaystyle M_{t}}$. The summation index implies that all monetary components contribute equally to the money total, and it views all components as dollar for dollar perfect substitutes. It has been argued that such an index does not weigh such components in a way that properly summarizes the services of the quantities of money.

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