Construction of an estimated domestic monetary base using new estimates of foreign holdings of U.S. currency

This paper presents a new method to estimate the amount of U.S. currency held abroad. The method exploits the fact the Federal Reserve System is the major processor of currency for depository institutions. The method exploits differentials across denominations in the ratios of shipments to receipts of currency at Federal Reserve cash offices in New York City and nationwide. The method permits us to construct a new monthly time series on the domestic monetary base, M1 and M2. The method has several advantages over previous methods, including an earlier starting date (1965) and the ability to be updated easily each month from Federal Reserve currency processing data. Relative to previous studies, our estimates suggest larger currency exports during the 1970s and early 1980s, and a sharp slowing of exports since 1995. ; This paper has been replaced with working paper 2000-002, "The Domestic Adjusted Monetary Base".