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Irving Fisher on his head II: the consequences of the timing of payments for the demand for money

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  • George A. Akerlof
  • Ross D. Milbourne

Abstract

This paper explores the consequences of the timing of payments for the demand for money. It is found that if payments are the minimum of the money in the bank account or bills due, the demand for money will respond slowly to changes in income. This prediction disagrees with some formulations of the short-run demand for money (e.g., Irving Fisher's) but agrees with empirical estimates. The demand for money is adjusted to supply by changes in quantities (i.e., payments flows) rather than by changes in prices or interest rates.
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Suggested Citation

  • George A. Akerlof & Ross D. Milbourne, 1978. "Irving Fisher on his head II: the consequences of the timing of payments for the demand for money," Special Studies Papers 122, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgsp:122
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    Cited by:

    1. John H. Cochrane, 1999. "A Frictionless View of US Inflation," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 323-421, National Bureau of Economic Research, Inc.
    2. Tan Zhongming & Samuel Frimpong & Ding Guoping, 2019. "Impact of Financial Risk Indicators on Banks' Financial Performance in Ghana," Business and Economic Research, Macrothink Institute, vol. 9(4), pages 23-52, December.
    3. Mr. Subramanian S Sriram, 1999. "Survey of Literature on Demand for Money: Theoretical and Empirical Work with Special Reference to Error-Correction Models," IMF Working Papers 1999/064, International Monetary Fund.
    4. Neil R. Ericsson & John S. Irons, 1995. "The Lucas critique in practice: theory without measurement," International Finance Discussion Papers 506, Board of Governors of the Federal Reserve System (U.S.).
    5. Sunil Sharma & Neil R. Ericsson, 1998. "Broad money demand and financial liberalization in Greece," Empirical Economics, Springer, vol. 23(3), pages 417-436.
    6. Ericsson Neil R., 2016. "Testing for and estimating structural breaks and other nonlinearities in a dynamic monetary sector," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(4), pages 377-398, September.

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