Among the many troublesome econometric relationships, the demand for money has proved especially recalcitrant, as evidenced by a long history of tinkering with basic specifications, always in response to some recent perceived forecast failure. The shortcomings of this approach and an alternative...

This paper, prepared for the New Palgrave, attempts to summarize current mainstream views concerning the theory of money demand. A model is sketched in which a representative household is depicted as seeking to maximize utility over an infinite planting horizon, with each period's consumption...

The partial-adjustment approach to the specification of the short-run demand for money has dominated the literature for more than a decade. There are three basic problems with this approach. First, the same lag structure is imposed on all variables, and each independent variable enters only as a...

We exposit the link between money, velocity and prices in an inventory-theoretic model of the demand for money and explore the extent to which such a model can account for the short-run volatility of velocity, the negative correlation of velocity and the ratio of money to consumption, and the...

This paper develops a stochastic framework for the analysis of transactions and precautionary demand for money. The analysis is based on the principles of inventory managements and the key feature of the model is its stochastic characteristics which lead to the need for precautionary reserves....

A stable money demand forms the cornerstone in formulating and conducting monetary policy. Consequently, numerous theoretical and empirical studies have been conducted in both industrial and developing countries to evaluate the determinants and the stability of the money demand function. This...

Previous models of the demand for money are either inconsistent with contemporaneous adjustment of the price level to expected changes in the nominal money supply or imply implausible fluctuations in interest rates in response to unexpected changes in the nominal money supply. This paper...

In this paper we analyze an aggregative general equilibrimi model in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. We...

We estimate a nominal life-cycle portfolio choice model using shopping coststo generate money demand. The model delivers realistic implications forstock market participation and portfolio composition because money crowdsout other assets at lower levels of wealth. We quantify how...

We estimate a nominal life-cycle portfolio choice model using shopping costs to generate money demand. The model delivers realistic implications for stock market participation and portfolio composition because money crowds out other assets at lower levels of financial wealth. Higher mean...

Conventional estimates of the seigniorage-maximizing inflation rate often make use of the Cagan form, which implies a constant semielasticity of money demand with respect to inflation. This paper shows that the elasticity of substitution in transactions between money and bonds determines how the...

Electronic money constitutes (for the time being) the most recent innovation in payment instruments. The extent to which the further spread of electronic money might have consequences for monetary policy depends not least on the actual demand for electronic money. Numerous studies have sought to...

To evaluate critically whether under a market system, monetary exchange is always and everywhere based on profit-seeking behaviour, this article examines cash-in-hand work, a form of activity conventionally conceptualised as low paid employment heavily imbued with profit motivations on the part...

In recent decades in the US, slack on the product and labor markets has fluctuated a lot over the business cycle while inflation has been very stable. Motivated by this observation, we develop a business-cycle model in which fluctuations in demand and supply lead to fluctuations in slack but not...

In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to...

The use of payment cards, either debit or credit, is becoming more and more widespread in developed economies. Nevertheless, the use of cash remains significant. We hypothesize that the lack of card acceptance at the point of sale is a key reason why cash continues to play an important role. We...

The use of payment cards, either debit or credit, is becoming more and more widespread in developed economies. Nevertheless, the use of cash remains significant. We hypothesize that the lack of card acceptance at the point of sale is a key reason why cash continues to play an important role. We...

This paper addresses the "rate of return" puzzle of monetary theory. Similarly to the legal restrictions theory of the demand for money, we assume that Government bonds are subject to a minimum purchase requirement. Differently from this theory, however, we assume that intermediaries, when...

This study sets out to model non-bank public's desired holdings of five different measures of money in the Nigerian economy. These are currency outside banks (COB), demand deposits (DD), narrow money (M1), quasi money (QM), and broad money (M2).The study addresses many of the pitfalls involved...

This paper investigates which properties money-demand functions must satisfy so that they are consistent with Lucasís [Lucas, R.E., Jr., 2000. Inflation and welfare. Econometrica 68, 247-274] versions of the Sidrauski and the shopping-time models. We conclude that shopping-time-integrable...

This paper investigates which properties money-demand functions have to satisfy to be consistent with multidimensional extensions of Lucas (2000) versions of the Sidrauski (1967) and the shopping-time models. We also investigate how such classes of models relate to each other regarding the...

In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to...

In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to...

We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money - reduced-form vs. explicit role - neither induces theoretical nor quantitative differences in results. Given...

Legal restrictions theory suggests that interest-bearing money would dominate if there were no legal impediments precluding competition with non-interest-bearing currency. There are very few historical examples with meaningful issues of interest-bearing currency, however, and these tend to occur...

This article uses a consumer theory-based systemic approach to model the demand for monetary liquid asset holdings in Chile. We implement the suggestions and caveats of aggregation theory for the estimation of a demand system for liquid assets (monies) in static, dynamic and time-varying...

Conventional M1 demand functions reformulated using error-correction and cointegration techniques neither depict parameter stability nor satisfactorily explain short-run changes in M1. Thus, M1 remains unreliable as an indicator variable for monetary policy