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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Article provided by Oxford University Press in its journal Economic Inquiry.
Volume (Year): 42 (2004) Issue (Month): 3 (July) Pages: 518-533 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
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