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

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  • Burkhard Heer
  • Alfred Maussner
  • Paul D. McNelis

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.

Suggested Citation

  • Burkhard Heer & Alfred Maussner & Paul D. McNelis, 2007. "The Money-Age Distribution: Empirical Facts and Limited Monetary Models," CESifo Working Paper Series 1917, CESifo.
    • Handle: RePEc:ces:ceswps:_1917
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    References listed on IDEAS

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    Cited by:

    1. Ragot, Xavier, 2014. "The case for a financial approach to money demand," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 94-107.
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    3. Yaz Terajima & Jose-Victor Rios-Rull & Césaire Meh & Shutao Cao, 2013. "Demand for Liquidity and Welfare Cost of Inflation by Cohort and Age of Households," 2013 Meeting Papers 569, Society for Economic Dynamics.

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