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The Demand for Bank Reserves and Other Monetary Aggregates

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Author Info

  • Max Gillman
  • Michal Kejak

Abstract

The article starts with Haslag's (1998) model of the bank's demand for reserves and reformulates it with a cash-in-advance approach for both financial intermediary and consumer. This gives a demand for a base of cash plus reserves that is not sensitive to who gets the inflation tax transfer. It extends the model to formulate a demand for demand deposits, yielding an M1-type demand, and then includes exchange credit, yielding an M2-type demand. Based on the comparative statics of the model, it provides an interpretation of the evidence on monetary aggregates. This explanation relies on the nominal interest as well as technology factors of the banking sector. (JEL E31, E13, O42) Copyright 2004, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbh078
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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 42 (2004)
Issue (Month): 3 (July)
Pages: 518-533

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Handle: RePEc:oup:ecinqu:v:42:y:2004:i:3:p:518-533

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Cited by:
  1. Benk, Szilárd & Gillman, Max & Kejak, Michal, 2009. "A Banking Explanation of the US Velocity of Money: 1919-2004," CEPR Discussion Papers 7544, C.E.P.R. Discussion Papers.
  2. Max Gillman & Mark N Harris & Michal Kejak, 2007. "The Interaction of Inflation and Financial Development with Endogenous Growth," Money Macro and Finance (MMF) Research Group Conference 2006 29, Money Macro and Finance Research Group.
  3. Benk, Szilárd & Gillman, Max & Kejak, Michal, 2005. "Credit Shocks in the Financial Deregulatory Era: Not the Usual Suspects," Cardiff Economics Working Papers E2005/13, Cardiff University, Cardiff Business School, Economics Section.
  4. Max Gillman & Michal Kejak, 2005. "Inflation and Balanced-Path Growth with Alternative Payment Mechanisms," Economic Journal, Royal Economic Society, vol. 115(500), pages 247-270, 01.
  5. Ensar Yilmaz, 2010. "Inflation and output in the long and short run in Turkey," Empirica, Springer, vol. 37(3), pages 253-269, July.
  6. Max Gillman & Mark N. Harris, 2004. "Inflation, Financial Development and Growth in Transition Countries," Monash Econometrics and Business Statistics Working Papers 23/04, Monash University, Department of Econometrics and Business Statistics.
  7. Gillman, Max & Otto, Glenn, 2003. "Money demand in a banking time economy," HWWA Discussion Papers 254, Hamburg Institute of International Economics (HWWA).
  8. Max Gillman & Dario Cziráky, 2004. "Inflation and Endogenous Growth in Underground Economies," The wiiw Balkan Observatory Working Papers 050, The Vienna Institute for International Economic Studies, wiiw.

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