Precautionary Money Demand in a Cash-in-Advance Economy with Capital
AbstractWe use a stochastic cash-in-advance model with capital to analyze the behavior of economic agents with respect to a precautionary money demand. We show that the conditions under which agents demand more money than they actually spend in the shopping session differ according to the agent’s utility function parameter. When agents are highly risk averse, the precautionary money demand may arise under low technology shocks. The circumstances under which a nonbinding cash-in-advance constraint may appear are reversed in a model without capital. The reason of observed differences is the possibility of converting a fraction of output into capital, not only into real balances. Copyright Springer Science + Business Media, Inc. 2005
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Society for Computational Economics in its journal Computational Economics.
Volume (Year): 26 (2005)
Issue (Month): 1 (August)
cash-in-advance; precautionary money demand; real balances;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hromcova, Jana, 1998. "A note on income velocity of money in a cash-in-advance economy with capital," Economics Letters, Elsevier, vol. 60(1), pages 91-96, July.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Robert J. Hodrick & Narayana Kocherlakota & Deborah Lucas, 1989.
"The Variability of Velocity in Cash-In-Advance Models,"
NBER Working Papers
2891, National Bureau of Economic Research, Inc.
- Hodrick, Robert J & Kocherlakota, Narayana R & Lucas, Deborah, 1991. "The Variability of Velocity in Cash-in-Advance Models," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 358-84, April.
- Harald Uhlig, 1995.
"A toolkit for analyzing nonlinear dynamic stochastic models easily,"
Discussion Paper / Institute for Empirical Macroeconomics
101, Federal Reserve Bank of Minneapolis.
- Harald Uhlig, 1998. "A Toolkit for Analysing Nonlinear Dynamic Stochastic Models Easily," QM&RBC Codes 123, Quantitative Macroeconomics & Real Business Cycles.
- Uhlig, H., 1995. "A toolkit for analyzing nonlinear dynamic stochastic models easily," Discussion Paper 1995-97, Tilburg University, Center for Economic Research.
- Lucas, Robert E., 1984. "Money in a theory of finance," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 9-46, January.
- den Haan, Wouter J & Marcet, Albert, 1990.
"Solving the Stochastic Growth Model by Parameterizing Expectations,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 8(1), pages 31-34, January.
- Wouter Denhaan & Albert Marcet, 1990. "FORTRAN code for Simulation Parameterized Expecations Algorithm," QM&RBC Codes 57, Quantitative Macroeconomics & Real Business Cycles.
- Cooley, Thomas F, 1997. "Calibrated Models," Oxford Review of Economic Policy, Oxford University Press, vol. 13(3), pages 55-69, Autumn.
- Jana Hromcová, 2004. "On The Income Velocity Of Money In A Cash-In-Advance Economy With Capital," Working Papers. Serie AD 2004-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.