Contents -- Introduction -- 1 International Financial Aggregation and Index Number Theory: A Chronological Half-Century Empirical Overview -- 1.1. Introduction -- 1.2. Monetary Aggregation Theory -- 1.2.1. Monetary Aggregation -- 1.2.2. Aggregation Theory versus Index Number Theory -- 1.2.3. The Economic Decision -- 1.2.4. The Divisia Index -- 1.2.5. Risk Adjustment -- 1.2.6. Dual Space -- 1.2.7. Aggregation Error and Policy Slackness -- 1.3. The History of Thought on Monetary Aggregation -- 1.4. The 1960s and 1970s -- 1.5. The Monetarist Experiment: November 1979-November 1982 -- 1.6. End of the Monetarist Experiment: 1983-1984 -- 1.7. The Rise of Risk Adjustment Concerns: 1984-1993 -- 1.8. The Y2K Computer Bug: 1999-2000 -- 1.9. The Supply Side -- 1.10. European ECB Data -- 1.11. The Most Recent Data: Would You Believe This? -- 1.12. Conclusion -- Appendix -- 2 The Exact Theoretical Rational Expectations Monetary Aggregate -- 2.1. Introduction -- 2.2. Consumer Demand for Monetary Assets -- 2.3. Existence of a Monetary Aggregate for the consumer -- 2.4. The Solution Procedure -- 2.5. Monetary Policy -- 2.6. The Risk Neutral Case -- 2.7. A Generalization -- 2.8. Data and Specification -- 2.9. Estimation -- 2.10. Frequency Domain Tests -- 2.11. Frequency Domain Results -- 2.12. Conclusions -- 3 On User Costs of Risky Monetary Assets -- 3.1. Introduction -- 3.2. Consumer's Optimization Problem -- 3.3. Risk-adjusted User Cost of Monetary Assets -- 3.3.1. The Theory -- 3.3.2. Approximation to the Theory -- 3.4. Concluding Remarks -- 4 The Discounted Economic Stock of Money with VAR Forecasting -- 4.1. Introduction -- 4.2. Microfoundations of Consumer Demand for Money -- 4.2.1. Overview -- 4.2.2. User Cost of Money -- 4.3. Economic Aggregation and Index Number Theory -- 4.3.1. Definition of the Economic Stock of Money under Perfect Foresight.

4.3.2. Extension to Risk -- 4.3.3. CE and Simple Sum Indexes as Special Cases of the ESM -- 4.4. Measurement of the Economic Stock of Money -- 4.4.1. Method 1: Linearizing Around Current Values -- 4.4.2. Method 2: Martingale Expectations for only the Benchmark Rate -- 4.4.3. Method 3: Setting Covariances to Zero -- 4.5. Forecasting Models -- 4.5.1. Unrestricted VARs -- 4.5.2. Asymmetric VARs -- 4.5.3. Bayesian VARs -- 4.6. Model Specification -- 4.6.1. Data Description -- 4.6.2. Nonstationarity and Data Transformation -- 4.6.3. Selection of Lag Length -- 4.6.4. Criterion for Evaluation of Forecasting performance -- 4.6.5. Specification of Priors -- 4.7. Empirical Results: Forecasting Performance and Evaluation -- 4.8. Empirical Results: Estimation of Money Stock -- 4.8.1. Economic Stock of Money Computed using Actual Data -- 4.8.2. Economic Stock of Money Based on BVAR Forecasts -- 4.9. Discussion and Conclusion -- APPENDIX -- 5 Exchange Rate Determination from Monetary Fundamentals: An Aggregation Theoretic Approach -- 5.1. Introduction -- 5.2. The Role of Money Supply and Demand in Exchange Rate Models -- 5.3. Aggregation and Index Number Theory -- 5.4. Exchange Rate Forecasting with Divisia Money and User Cost Prices -- 5.4.1. Model Specification -- 5.4.2. Data Specification and Transformation -- 5.4.3. Estimation and Forecasting -- 5.4.4. Forecast Comparisons -- 5.5. The Empirical Results -- 5.5.1. The MSE and DM Comparisons -- 5.5.2. The DOC Results -- 5.6. Conclusion -- 6 Multilateral Aggregation-Theoretic Monetary Aggregation over Heterogeneous Countries -- 6.1. Introduction -- 6.2. Definition of Variables -- 6.3. Aggregation within Countries -- 6.4. Aggregation Over Countries -- 6.5. Special Cases -- 6.5.1. Purchasing Power Parity -- 6.5.2. Multilateral Representative Agent over the Economic Union.

6.5.3. Existence of a Unilateral Representative Agent over the Economic Union -- 6.6. Interest Rate Aggregation -- 6.7. Divisia Second Moments -- 6.8. Conclusions -- 7 Measurement Error in Monetary Aggregates: A Markov Switching Factor Approach -- 7.1. Introduction -- 7.2. Monetary Aggregation Theory -- 7.2.1. Monetary Aggregation -- 7.2.2. Aggregation Theory versus Index Number Theory -- 7.2.3. The Economic Decision -- 7.2.4. The Divisia Index -- 7.2.5. Risk Adjustment -- 7.2.6. Dual Space -- 7.3. The State Space Model -- 7.4. Empirical Results -- 7.4.1. Data -- 7.4.2. Specification Tests -- 7.4.3. High and Low Inflation and Interest Rate Phases -- 7.4.4. Estimates -- 7.4.5. Simple M1 Aggregate and Divisia M1 -- 7.4.6. Simple M2 Aggregate and Divisia M2 -- 7.4.7. Simple M3 Aggregate and Divisia M3 -- 7.5. Summary of Findings -- 7.6. Conclusions -- References -- Author Index.