The Liquidity Services of Money

Peter Hartley

International Economic Review, 1988, vol. 29, issue 1, 1-24

Abstract: This paper investigates the liquidity services provided by cash, interest-bearing "check balances," and "securities" which pay higher interest than checks. Securities must be traded before con sumers know their desired level or composition of consumption. Cash a nd checks are "more liquid" since they are available on demand. Cas h is "more liquid" than checks since it is more widely useable as a medium of exchange. Cash will often be used to buy goods which could be bought by check, and the demand for cash will be less sensitive t han the demand for checks to the interest paid on check balances. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1988
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