Six decades of inflation and money demand

Alexi Thompson and Henry Thompson
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Alexi Thompson: Indiana University of Pennsylvania

Journal of Economics and Finance, 2021, vol. 45, issue 2, No 3, 240-251

Abstract: Abstract The present estimates of dollar demand treat inflation as a separate variable in a money market model with annual data covering nearly six decades from 1960 to 2017. The difference stationary series lead to robust error correction estimates in double log differences. Structural breaks for money supply targeting in 1980 and bank bailout policy in 2009 improve the estimates. Inflation has an elastic effect on store of value and transactions demands. Rising income incompletely offsets declining dollar demand. Transactions demand appears to be especially sensitive to a decrease in inflation.

Keywords: Inflation; Money demand (search for similar items in EconPapers)
JEL-codes: E31 E4 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s12197-020-09510-y

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