Short-Run Money Demand

Laurence Ball

No 9235, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The paper estimates a long-run demand function for M1, using U.S. data for 1959-1993. This paper interprets deviations from this long-run relation with Goldfeld's partial adjustment model. A key innovation is the choice of the interest rate in the money demand function. Most previous work uses a short-term market rate, but this paper uses the average return on near monies' close substitutes for M1 such as savings accounts and money market mutual funds. This approach yields a predicted path of M1 velocity that closely matches the data. The volatility of velocity after 1980 is explained by volatility in the returns on near monies.

JEL-codes: E41 (search for similar items in EconPapers)
Date: 2002-09
Note: EFG ME
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Citations: View citations in EconPapers (16)

Published as Ball, Laurence, 2012. "Short-run money demand," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 622-633.

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Journal Article: Short-run money demand (2012)
Working Paper: Short-run Money Demand (2002)
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