Resource title

Money demand in a banking time economy

Resource image

image for OpenScout resource :: Money demand in a banking time economy

Resource description

The paper presents a theory of the demand for money that combines a special case of the shopping time exchange economy with the cash-in-advance framework. The model predicts that both higher inflation and financial innovation - that reduces the cost of credit - induce agents to substitute away from money towards exchange credit. This results in an interest elasticity of money that rises with the inflation rate rather than the constant elasticity found in standard shopping time specifications. A number of the key predictions of the banking time theory are tested using quarterly data for the US and Australia. We find cointegration empirical support for the model, with robustness checks and a comparison to a standard specification.

Resource author

Max Gillman, Glenn Otto

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19226

Resource license

Adapt according to the presented license agreement and reference the original author.