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Neoclassical Consumer Demand Theory and the Demand for Money

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  • Barr, D G
  • Cuthbertson, Keith
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    Abstract

    M. Friedman (1956) suggests that the demand for money should be analyzed in terms of consumer demand theory, although often the interpretation of empirical results from studies using aggregate data appears to be in terms of the "motives approach" (i.e., transactions, precautionary, and speculative motives). The authors develop Friedman's ideas within an explicit model of consumer theory and find that they provide a consistent framework for analyzing portfolio choice and offer greater insights into results from aggregate studies of the demand for money than the motives approach. In particular, the authors provide a new interpretation of the role of nominal interest rates, inflation, and a Hicksian measure of wealth in the demand for money function. Copyright 1991 by Royal Economic Society.

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    Bibliographic Info

    Article provided by Royal Economic Society in its journal The Economic Journal.

    Volume (Year): 101 (1991)
    Issue (Month): 407 (July)
    Pages: 855-76

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    Handle: RePEc:ecj:econjl:v:101:y:1991:i:407:p:855-76

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    Cited by:
    1. Ingrid Groessl & Ulrich Fritsche, 2006. "The Store-of-Value-Function of Money as a Component of Household Risk Management," Macroeconomics and Finance Series 200606, Hamburg University, Department Wirtschaft und Politik.
    2. Chris Allen & Katerina Smidkova, 2003. "Voucher Privatization, Households´ Demand for Consumption Goods and Financial Assets and Implications for Macroeconomic Policy," Macroeconomics 0303013, EconWPA.
    3. Smith, Clare & Hall, Stephen & Mabey, Nick, 1995. "Econometric modelling of international carbon tax regimes," Energy Economics, Elsevier, vol. 17(2), pages 133-146, April.
    4. Christopher Adam, . "The Transactions Demand for Money in Chile," QEH Working Papers qehwps60, Queen Elizabeth House, University of Oxford.
    5. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272.
    6. Eduardo Pozo, 2000. "Government Financing and Interest Rates in a Three Assets Sidrauski-based Model," Macroeconomics 0004017, EconWPA.
    7. Lang, Oliver, 1995. "Steuersubventionen und Ersparnisbildung in Lebensversicherungen," ZEW Discussion Papers 95-13, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. David Blake, 2003. "Modelling the composition of personal sector wealth in the United Kingdom," LSE Research Online Documents on Economics 24866, London School of Economics and Political Science, LSE Library.
    9. Christopher J. Green & Victor Murinde, 2003. "Flow of funds: implications for research on financial sector development and the real economy," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 1015-1036.

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