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Buffer Stock Money and the Company Sector

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  • Ireland, Jonathan
  • Wren-Lewis, Simon

Abstract

This paper investigates the role of financial buffer stocks in company sector decisions. A stylized.analytic model is used to consider how adjustment costs in changing dividends can generate a role for a financial buffer stock in any expenditure decision by the firm which has a influence beyond the current period. Cointegration techniques are then used to focus on the desired holding of financial buffers by the U.K. industrial and commercial companies. When included in a number of company sector expenditure equations taken from the National Institute's U.K. macro model these measures of desired holdings were in the main correctly signed. The authors find support for the view that reducing stocks was one of the most common ways of improving liquidity and also evidence of strong effects on employment and investment. Copyright 1992 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 44 (1992)
Issue (Month): 2 (April)
Pages: 209-31

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Handle: RePEc:oup:oxecpp:v:44:y:1992:i:2:p:209-31

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Cited by:
  1. Ryland Thomas, 1997. "The Demand for M4: A Sectoral Analysis Part 2 The Corporate Sector," Bank of England working papers 62, Bank of England.
  2. Goodhart, Charles, 1989. "The Conduct of Monetary Policy," Economic Journal, Royal Economic Society, vol. 99(396), pages 293-346, June.
  3. Darby, Julia & Ireland, Jonathan & Leith, Campbell & Wren-Lewis, Simon, 1998. "COMPACT: a rational expectations, intertemporal model of the United Kingdom economy," Economic Modelling, Elsevier, vol. 16(1), pages 1-52, January.
  4. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research and International Relations Area.
  5. Arusha Cooray & Marcella Lucchetta & Antonio Paradiso, 2013. "A knowledge economy approach in empirical growth models for the Nordic countries," Economics Working Papers wp13-06, School of Economics, University of Wollongong, NSW, Australia.
  6. Domac, Iker & Elbirt, Carolos, 1998. "The main determinants of inflation in Albania," Policy Research Working Paper Series 1930, The World Bank.
  7. Andrew Brigden & Paul Mizen, 1999. "Money, credit and investment in UK corporate sector," Bank of England working papers 100, Bank of England.
  8. Arusha Cooray & Antonio Paradiso, 2012. "The level and growth effects in empirical growth models for the Nordic countries: A knowledge economy approach," CAMA Working Papers 2012-36, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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