The case for a financial approach to money demand

Xavier Ragot

PSE Working Papers from HAL

Abstract: The distribution of money across households is much more similar to the distribution of financial assets than to that of consumption levels, even controlling for life-cycle effects. This is a puzzle for theories which directly link money demand to consumption, such as cash-in-advance (CIA), money-in-the-utility function (MIUF) or shopping-time models. This paper shows that the joint distribution of money and nancial assets can be explained by an incomplete-market model when frictions are introduced into financial markets. Money demand is modeled as a portfolio choice with a fixed transaction cost in financial markets.

Keywords: money demand; money distribution; heterogenous agents (search for similar items in EconPapers)
Date: 2008-10
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00586066v1
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Citations: View citations in EconPapers (2)

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Working Paper: The case for a financial approach to money demand (2008)
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