Money Demand near Zero Interest Rate: Evidence from Regional Data

Using Japanese regional data, we have obtained estimates of the income elasticity of demand deposits that are positive, have values that are close to one, and are statistically significantly different from zero, not only during the period of the low interest rate policy implemented after 1995 but also during the period of the "zero interest rate policy." The stable relationship obtained from regional data could provide useful information by which to judge the stability of the money demand function.