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Inventory‐Theoretic Money Demand and Relative Price Dynamics

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  • HIROKAZU ISHISE NAO SUDO

Abstract

We construct a two‐goods inventory‐theoretic money demand model and find that the model implies, in a monetary contraction, the decline in the prices of low cash‐intensity goods, durables, or luxuries outpaces that of high cash‐intensity goods, nondurables, or necessities. Using U.S. data, we show that our model’s predictions are consistent with the data.

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  • Hirokazu Ishise Nao Sudo, 2013. "Inventory‐Theoretic Money Demand and Relative Price Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2‐3), pages 299-326, March.
    • Handle: RePEc:wly:jmoncb:v:45:y:2013:i:2-3:p:299-326
    DOI: 10.1111/jmcb.12003
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    References listed on IDEAS

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