How Endogenous Is Money? Evidence from a New Microeconomic Estimate
David Cuberes () and
MPRA Paper from University Library of Munich, Germany
This paper uses microeconomic data on firms’ money demand and investment in physical capital for the period 1983-2006 to estimate the extent to which variation in the U.S. money supply is an endogenous response to variation in firms’ demand for liquidity. We estimate a simple model in which each firm’s desired money balances in any period depend on that firm’s current transactions, current investment, and its planned future investment, as well as aggregate variables such as interest rates and common policy forecasts. Calculations based on our estimates suggest that only a very small fraction of the variability in the aggregate stock of money represents an endogenous response to autonomous changes in firms’ investment plans.
Keywords: Money demand; money supply; endogenous money; monetary neutrality (search for similar items in EconPapers)
JEL-codes: E41 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
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Working Paper: How Endogenous Is Money? Evidence from a New Microeconomic Estimate (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17744
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