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The money-age distribution: Empirical facts and the limits of three monetary models

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  • Heer, Burkhard
  • Maußner, Alfred
  • McNelis, Paul D.

Abstract

The money-age distribution is hump-shaped for the US post-war economy. There is no clear-cut relation between the variation of money holdings within generations and age. Furthermore, money is found to be only weakly correlated with both income and wealth. We analyze three motives for money demand in an overlapping generations setup in order to explain these observations: (1) money-in-the-utility, (2) an economy with costly credit service, and (3) limited-participation. All three models are consistent with the hump-shaped relation between average money holdings and age, yet they predict a much closer association between money holdings, income, wealth, and age than we find in the data. Only the limited-participation model partly replicates the low bivariate correlation between money and income as well as between money and interest-bearing assets. None of the three models satisfactorily explains these stylized facts.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 33 (2011)
Issue (Month): 3 (September)
Pages: 390-405

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Handle: RePEc:eee:jmacro:v:33:y:2011:i:3:p:390-405

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Money-age distribution Money demand OLG model;

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Cited by:
  1. Ragot, X., 2010. "The Case for a Financial Approach to Money Demand," Working papers 300, Banque de France.
  2. : Carlo A. Favero & : Arie E. Gozluklu & : Haoxi Yang, 2013. "Demographics and The Behavior of Interest Rates," Working Papers wpn13-10, Warwick Business School, Finance Group.
  3. Yaz Terajima & Jose-Victor Rios-Rull & Césaire Meh & Shutao Cao, 2013. "Demand for Liquidity and Welfare Cost of Inflation by Cohort and Age of Households," 2013 Meeting Papers 569, Society for Economic Dynamics.
  4. repec:hal:wpaper:halshs-00586066 is not listed on IDEAS

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