Against this background it is crucial to emphasize that monetary and financial data are far less affected by such measurement problems than data from the real economy. Monetary data are available very quickly. And they are available with a much smaller measurement error than other key variables. Therefore, money may serve as an important indicator of current economic activity.
On a microeconomic level, private agents´ real money holdings depend amongst other determinants on their individual real income which is known to them.7 If agents are able to quickly adapt their money holdings, changes in their real income will quickly translate into changes in their money holding. As a consequence, changes in aggregate real income quickly lead to changes in aggregate money.