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The money-age distribution: Empirical facts and economic modelling

Burkhard Heer (), Alfred Maussner () and Paul McNelis ()

No 191, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: The money-age distribution is found to be hump-shaped for the US economy. The variation (inequality) of cash holdings within generations increases (declines) with age. Furthermore, cash holdings are found to be only weakly correlated ith both income and wealth. We analyze three motives for money demand in an overlapping generations model in order to explain this effect: 1) money in the utility, 2) an economy with costlyc credit service, and 3) limited participation. Both the simple money-in-the-utility model and the economy with the cash-credit goods are able to replicate the hump-shape profiles of cash holdings and its variation, but not the decreasing inequality within generations over age. In addition, we discuss the optimality of the Friedman rule in heterogeneous-agent economies. In the three models, zero inflation and zero nominal interest rates imply significant welfare losses

Keywords: Money-age distribution; money demand (search for similar items in EconPapers)
JEL-codes: E41 E31 D30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2006-07-04
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http://repec.org/sce2006/up.8939.1140525200.pdf (application/pdf)

Related works:
Journal Article: THE BURDEN OF UNANTICIPATED INFLATION: ANALYSIS OF AN OVERLAPPING-GENERATIONS MODEL WITH PROGRESSIVE INCOME TAXATION AND STAGGERED PRICES (2012) Downloads
Journal Article: The money-age distribution: Empirical facts and the limits of three monetary models (2011) Downloads
Working Paper: The Money-Age Distribution: Empirical Facts and Limited Monetary Models (2007) Downloads
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