The Case for a Financial Approach to Money Demand

Xavier Ragot

Working papers from Banque de France

Abstract: The distribution of money across households is much more similar to the distribution of financial assets than to that of consumption levels. This is a puzzle for theories which directly link money demand to consumption. This paper shows that the joint distribution of money and financial assets can be explained in an heterogeneous agent model where both a cash-in-advance constraint and financial adjustment costs, as in the Baumol-Tobin literature, are introduced. Studying each friction in turn, I find that the financial friction explains 85% of total money demand. Classification-JEL: E40, E50.

Keywords: Money Demand; Money Distribution; Heterogeneous Agents. (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: The case for a financial approach to money demand (2014)
Working Paper: The case for a financial approach to money demand (2014)
Working Paper: The case for a financial approach to money demand (2014)
Working Paper: The Case for a Financial Approach to Money Demand (2009)
Working Paper: The case for a financial approach to money demand (2008)
Working Paper: The case for a financial approach to money demand (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:300

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