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The case for a financial approach to money demand

Xavier Ragot ()

Sciences Po publications from Sciences Po

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)
New Economics Papers: this item is included in nep-dge and nep-mon
Date: 2014-03
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Published in Journal of Monetary Economics, 2014, vol. 62, pp.94-107

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Related works:
Journal Article: The case for a financial approach to money demand (2014) Downloads
Working Paper: The case for a financial approach to money demand (2014)
Working Paper: The Case for a Financial Approach to Money Demand (2010) Downloads
Working Paper: The Case for a Financial Approach to Money Demand (2009) Downloads
Working Paper: The case for a financial approach to money demand (2008) Downloads
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