The case for a financial approach to money demand

Xavier Ragot

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Abstract: The distribution of money across households is much more similar to the distribution of financial assets than to that of consumption expenditures. This is a puzzle for theories which directly link money demand to consumption. This paper shows that the joint distribution of money and financial assets can be explained in a heterogeneous-agent model where both a cash-in-advance constraint and financial adjustment costs, as in the Baumol-Tobin literature, are introduced. Studying each friction in turn, one finds that the financial friction explains more than 78% of total money demand.

Keywords: Money Demand; Money Distribution; Heterogenous Agents (search for similar items in EconPapers)
Date: 2014-03
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00978785v1
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Citations: View citations in EconPapers (45)

Published in Journal of Monetary Economics, 2014, 62 (1), pp.94 - 107. ⟨10.1016/j.jmoneco.2013.09.005⟩

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Related works:
Journal Article: The case for a financial approach to money demand (2014)
Working Paper: The case for a financial approach to money demand (2014)
Working Paper: The Case for a Financial Approach to Money Demand (2010)
Working Paper: The Case for a Financial Approach to Money Demand (2009)
Working Paper: The case for a financial approach to money demand (2008)
Working Paper: The case for a financial approach to money demand (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00978785

DOI: 10.1016/j.jmoneco.2013.09.005

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