Expected Equity Returns and the Demand for Money
Stern Liliana V () and
Michael Stern ()
Additional contact information
Stern Liliana V: Auburn University
The B.E. Journal of Macroeconomics, 2008, vol. 8, issue 1, 29
Abstract:
This paper investigates the role of equity markets in the determination of money demand. Expected equity returns are found to be significant determinants of money demand in the long run. We also uncover a strong positive drift in the elasticity of money demand with respect to expected equity returns. Moreover, this elasticity has recently become positive. We explain the puzzle of positive interest elasticity by modifying a conventional model of money demand. We show that if equities are also allowed to provide some liquidity, then the model can support both positive and negative elasticities with respect to expected returns.
Keywords: money demand; expected equity returns; portfolio choice; liquidity (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
https://doi.org/10.2202/1935-1690.1592 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:8:y:2008:i:1:n:18
Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html
DOI: 10.2202/1935-1690.1592
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().