Financial Innovation and Regional Money

Jun Nagayasu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the effect that financial innovation, which seems very prominent in recent years, has on money. Using Japanese regional data and the money demand specification, we first provide evidence of instability in the simple money-output relationship. However, when this relationship is extended to include a proxy for a comprehensive measure of financial innovation, the model is found to be stable. Furthermore, consistent with economic theory, evidence is obtained of financial innovation leading to decreased demand for liquid financial assets. In this respect, demand deposits seem to possess very similar characteristics to cash in Japan in recent years.

Keywords: Regional money; panel cointegration (search for similar items in EconPapers)
JEL-codes: E41 (search for similar items in EconPapers)
Date: 2011-01
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Financial innovation and regional money (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:29194

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