Money demand by non-financial corporations

Luca Nocciola

No 3182, Working Paper Series from European Central Bank

Abstract: We document empirically the money demand by European non-financial corporations by exploiting a unique and brand-new survey on their cash usage in a stress period. We also assess: (i) the relation between cash held and firm size; and (ii) estimate point values of cash holdings and carry out statistical comparisons along the sectoral and country dimensions. First, we find that cash holdings are inversely related to firm size, providing additional evidence that Small and Medium Enterprises (SMEs) tend to store more cash relative to their larger peers. Second, we find that cash-intensive sectors and” cash-friendly” countries display right-shifted distributions of cash holdings with statistically-significant larger average holdings. We argue that in a low interest rate and low inflation environment cash holdings serve as a store of value for European firms, in particular for SMEs which are more likely to be financially constrained, especially in crisis times. JEL Classification: D22, D25, E41, G01, G32

Keywords: cash demand; financial crisis; monetary economics; precautionary savings; store of value (search for similar items in EconPapers)
Date: 2026-02
Note: 2600378
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263182

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