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The Money-Age Distribution: Empirical Facts and Limited Monetary Models

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Author Info
Burkhard Heer ()
Alfred Maussner ()
Paul D. McNelis ()

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Abstract

The money-age distribution is hump-shaped for the US post-war economy. There is no clear cut relation between the variation of money holdings within generations and age. Furthermore, money is found to be only weakly correlated with both income and wealth. We analyze three motives for money demand in an overlapping generations model in order to explain these observations: 1) money in the utility, 2) an economy with costly credit service, and 3) limited participation. All three models are consistent with the hump-shaped relation between average money holdings and age, yet they predict a much closer association between money holdings, income, wealth, and age than we find in the data. Only the limited-participation model partly replicates the low bivariate correlation between money and income as well as between money and interest bearing assets. None of the three models satisfactorily explains these stylized facts.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1917.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_1917

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Related research
Keywords: money-age distribution; money demand; OLG model;

Find related papers by JEL classification:
D30 - Microeconomics - - Distribution - - - General
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

References listed on IDEAS
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    Other versions:
  2. Freeman, Scott, 1987. "Reserve requirements and optimal seigniorage," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 307-314, March. [Downloadable!] (restricted)
  3. Heer, Burkhard & Sussmuth, Bernd, 2007. "Effects of inflation on wealth distribution: Do stock market participation fees and capital income taxation matter?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 277-303, January. [Downloadable!] (restricted)
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  5. Gillman, Max, 1993. "The welfare cost of inflation in a cash-in-advance economy with costly credit," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 97-115, February. [Downloadable!] (restricted)
  6. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1995. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Schreft, S L, 1992. "Transaction Costs and the Use of Cash and Credit," Economic Theory, Springer, vol. 2(2), pages 283-96, April.
  8. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May. [Downloadable!] (restricted)
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  9. Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July. [Downloadable!] (restricted)
  10. Orazio Attanasio & Luigi Guiso & Tuillo Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," NBER Working Papers 6593, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Hansen, G.D., 1991. "The Cyclical and Secular Behavior of the Labor Input : Comparing Efficiency Units and Hours Worked," Papers 36, California Los Angeles - Applied Econometrics.
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  12. Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Xavier Ragot, 2008. "The case for a financial approach to money demand," PSE Working Papers 2008-56, PSE (Ecole normale supérieure). [Downloadable!]
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