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Sectoral Money Demand: A Co-integration Approach

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  • Jain, Parul
  • Moon, Choon-Geol

Abstract

The major emphasis in previous money demand studies has been at the aggregate level, with little systematic attention paid to sectoral differences in money holding behavior. This paper attempts to address the latter issue by focusing on more homogeneous subgroups to gauge money holding patterns. We apply cointegration theory to identify long-run money demand functions for the household and business sectors of the U.S. economy. In general, our results, which are based on the 1960-1990 U.S. monetary experience, suggest substantial sectoral divergences in long-run relationships. In particular, the household sector reveals more stable relationships. The business sector indicates strong interest elasticities, which are found to be negligible for the household case. These findings are invariant to alternative money definitions and for different sample periods. Copyright 1994 by MIT Press.

Suggested Citation

  • Jain, Parul & Moon, Choon-Geol, 1994. "Sectoral Money Demand: A Co-integration Approach," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 196-202, February.
    • Handle: RePEc:tpr:restat:v:76:y:1994:i:1:p:196-202
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    Cited by:

    1. Franz Seitz & Julian von Landesberger, 2014. "Household Money Holdings in the Euro Area: An Explorative Investigation," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(2), pages 83-115, November.
    2. Calza, Alessandro & Zaghini, Andrea, 2010. "Sectoral money demand and the great disinflation in the US," Working Paper Series 1218, European Central Bank.
    3. Qayyum, Abdul, 1999. "Demand for Money By Business Sector in a Developing Country: Evidence from Pakistan," MPRA Paper 2583, University Library of Munich, Germany, revised 0199.
    4. Franz Seitz & Julian von Landesberger, 2012. "Household Money Demand: The Euro Area Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(III), pages 409-438, September.
    5. John Ashworth & David Barlow & Lynne Evans, 2014. "Sectoral Money Demand Behaviour and the Welfare Cost of Inflation in the UK," Manchester School, University of Manchester, vol. 82(6), pages 732-750, December.
    6. Wankeun Oh, 2002. "Cointegration and Structural Change: An Application to the U.S. Demand for Money," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 91-101, January.

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