The case for a financial approach to money demand
Xavier Ragot ()
Sciences Po publications from Sciences Po
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)
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Published in Journal of Monetary Economics, 2014, vol. 62, pp.94-107
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Journal Article: The case for a financial approach to money demand (2014)
Working Paper: The case for a financial approach to money demand (2014)
Working Paper: The Case for a Financial Approach to Money Demand (2010)
Working Paper: The Case for a Financial Approach to Money Demand (2009)
Working Paper: The case for a financial approach to money demand (2008)
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