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Monetary policy and monetary asset substitution

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  • Jones, Barry E.
  • Fleissig, Adrian R.
  • Elger, Thomas
  • Dutkowsky, Donald H.

Abstract

This paper shows that changing the target Federal Funds rate induces changes in relative user costs of monetary assets. Estimated Morishima elasticities of substitution from the Fourier Flexible form reveal greater substitution from transactions assets and savings deposits into small time deposits than into retail money market mutual funds.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 99 (2008)
Issue (Month): 1 (April)
Pages: 18-22

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Handle: RePEc:eee:ecolet:v:99:y:2008:i:1:p:18-22

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Web page: http://www.elsevier.com/locate/ecolet

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  1. 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.
  2. Douglas Fisher & Adrian R. Fleissig & Apostolos Serletis, 2001. "An empirical comparison of flexible demand system functional forms," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(1), pages 59-80.
  3. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
  4. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-88, September.
  5. Livio Stracca, 2004. "Does Liquidity Matter? Properties of a Divisia Monetary Aggregate in the Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 309-331, 07.
  6. Fisher, Douglas & Fleissig, Adrian R, 1997. "Monetary Aggregation and the Demand for Assets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 458-75, November.
  7. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-57, Sept.-Nov.
  8. Jones, Barry E. & Dutkowsky, Donald H. & Elger, Thomas, 2005. "Sweep programs and optimal monetary aggregation," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 483-508, February.
  9. William A. Barnett, 2003. "Aggregation-Theoretic Monetary Aggregation over the Euro Area, when Countries are Heterogeneous," Macroeconomics 0309018, EconWPA.
  10. Barnett, William A., 1978. "The user cost of money," Economics Letters, Elsevier, vol. 1(2), pages 145-149.
  11. Davis, George C & Gauger, Jean, 1996. "Measuring Substitution in Monetary-Asset Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 203-08, April.
  12. John B. Carlson & Dennis L. Hoffman & Benjamin D. Keen & Robert H. Rasche, 1999. "Results of a study of the stability of cointegrating relations comprised of broad monetary aggregates," Working Paper 9917, Federal Reserve Bank of Cleveland.
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Cited by:
  1. Zagaglia, Paolo, 2009. "Monetary Asset Substitution in the Euro Area," MPRA Paper 17878, University Library of Munich, Germany.

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