The demand for money by private firms in a regulated economy: Theoretical underpinnings and empirical evidence for Germany 1960-1998

Martin T. Bohl and Friedrich L. Sell

No 2002,3, Working Papers in Economics from Bundeswehr University Munich, Economic Research Group

Abstract: Based on a cash-in-advance approach, this paper investigates theoretically the determinants of money holdings of firms under the conditions of a highly regulated labor market and analyses empirically the demand for money of German businesses during the period 1960-1998. As a result of our theoretical analysis the demand for cash balances by firms for shadow market activities depends among other things positively on the expected wage wedge. The empirical results show that the coefficient of the wage wegde has a positive sign in the long-run cointegrating relationship and is statistically significant positive in the short-run dynamics of the error correction model.

Keywords: Money Demand by Firms; Wage Wedge; Cash-in-Advance Model; Cointegration; Error-Correction; Geldnachfrage von Unternehmen; Cash-in-advance-Modell; Kointegration; FehlerKorrektur-Modell; Lohnzusatzkosten (search for similar items in EconPapers)
JEL-codes: C22 E41 J30 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ubwwpe:20023

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