Trigger-Target Rules Need Not Be Optimal with Fixed Adjustment Costs: A Simple Comment on Optimal Money Holding under Uncertainty

Avner Bar-ilan

International Economic Review, 1990, vol. 31, issue 1, 229-34

Abstract: Literature concerning the transactions theory of demand for money often contains the assumption that simple trigger-target rules are optimal when each financial transaction is accompanied by a fixed cost. The validity of this assumption is examined in this paper. Using a simple example, it is shown that the optimal money rule in discrete time models of money demand may be much more complicated than the simple rules assumed to be optimal in the literature. However, when considering continuous time models of money demand or when adjustment of the money stock is allowed in one direction only, simple trigger-target rules are in fact optimal. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1990
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://links.jstor.org/sici?sici=0020-6598%2819900 ... O%3B2-K&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:ier:iecrev:v:31:y:1990:i:1:p:229-34

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and ().