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The demand of liquid assets with uncertain lumpy expenditures

Fernando Alvarez and Francesco Lippi
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Fernando Alvarez: University of Chicago

No 1307, EIEF Working Papers Series from Einaudi Institute for Economics and Finance (EIEF)

Abstract: We consider an inventory model for a liquid asset where the per-period net expenditures have two components: one that is frequent and small and another that is infrequent and large. We give a theoretical characterization of the optimal management of liquid asset as well as of the implied observable statistics. We use our characterization to interpret some aspects of households’ currency management in Austria, as well as the management of demand deposits by a large sample of Italian investors.

Date: 2013, Revised 2013-03
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Related works:
Journal Article: The demand of liquid assets with uncertain lumpy expenditures (2013) Downloads
Working Paper: The Demand of Liquid Assets with Uncertain Lumpy Expenditures (2012) Downloads
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