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Modeling the effects of inflation on the demand for money

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  • Kenneth M. Emery

Abstract

Because the Federal Reserve is responsible for controlling the value of money, economic policymakers are very concerned with forecasting the public's demand for money. Inflation is one of several factors that have made forecasting the demand for money increasingly difficult over the past fifteen years. In this article, Kenneth M. Emery reviews the ways that inflation may affect the demand for money, and he examines how well traditional money-demand models have captured these effects in the postwar period. ; Emery finds that money-demand models would have performed better during 1953-79 had they included the direct effects of inflation. However, he also finds some evidence that the wide use of interest-bearing money and moderate rates of inflation during the 1980s diminished the effects of inflation on the demand for money.

Suggested Citation

  • Kenneth M. Emery, 1991. "Modeling the effects of inflation on the demand for money," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Mar, pages 17-29.
    • Handle: RePEc:fip:fedder:y:1991:i:mar:p:17-29
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    Cited by:

    1. Masoud Moghaddam, 1997. "Financial innovations and the interest elasticity of money demand: Evidence from an error correction model," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 25(2), pages 155-163, June.
    2. Gordon de Brouwer & Irene Ng & Robert Subbaraman, 1993. "The Demand for Money in Australia: New Tests on an Old Topic," RBA Research Discussion Papers rdp9314, Reserve Bank of Australia.

    More about this item

    Keywords

    Money supply; Econometric models;

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