This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Store-of-Value-Function of Money as a Component of Household Risk Management

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Ingrid Groessl () (Department for Economics and Politics, University of Hamburg)
Ulrich Fritsche () (Department for Economics and Politics, University of Hamburg, and DIW Berlin)

Additional information is available for the following registered author(s):

Abstract

We analyse how money as a store of value affects the decisions of a representative household under diversifiable and non-diversifiable risks. given that the central bank successfully stabilizes the rate of inflation at a low level. Assuming exponential utility allows us to derive an explicit relationship between optimal money holdings, the household's desire to tilt, smooth and stabilize consumption as well as minimize portfolio risk. In this context we also show how the correlation between stochastic labour income and stock returns impact the store-of-value function of money. Finally we prove that the store-of-value benefits of money holdings continue to hold even if we take riskless alternatives into account.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.wiso.uni-hamburg.de/hepdoc/macppr_6_2006.pdf
File Format: application/pdf
File Function: First version, 2006
Download Restriction: no

Publisher Info
Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200606.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 25 pages
Date of creation: Dec 2006
Date of revision:
Handle: RePEc:hep:macppr:200606

Contact details of provider:
Web page: http://www.wiso.uni-hamburg.de/dwp
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Ulrich Fritsche).

Related research
Keywords: Money demand; consumption; CRRA; CARA; exponential utility; households; risk; risk management;

Other versions of this item:

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. Jiri Slacalek, 2006. "International Wealth Effects," Discussion Papers of DIW Berlin 596, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  2. Aizenman, Joshua, 1998. "Buffer stocks and precautionary savings with loss aversion," Journal of International Money and Finance, Elsevier, vol. 17(6), pages 931-947, December. [Downloadable!] (restricted)
  3. Sandmo, Agnar, 1970. "The Effect of Uncertainty on Saving Decisions," Review of Economic Studies, Blackwell Publishing, vol. 37(3), pages 353-60, July. [Downloadable!] (restricted)
  4. Livio Stracca, 2003. "The Functional Form Of The Demand For Euro Area M1," Manchester School, University of Manchester, vol. 71(2), pages 172-204, 03. [Downloadable!] (restricted)
    Other versions:
  5. Miguel Lebre de Freitas & Francisco José Veiga, 2006. "Currency substitution, portfolio diversification, and money demand," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 719-743, August. [Downloadable!] (restricted)
    Other versions:
  6. Saving, Thomas R, 1971. "Transactions Costs and the Demand for Money," American Economic Review, American Economic Association, vol. 61(3), pages 407-20, June. [Downloadable!] (restricted)
  7. Farmer, Roger E A, 1997. "Money in a Real Business Cycle Model," CEPR Discussion Papers 1630, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Lemke, Wolfgang & Greiber, Claus, 2005. "Money demand and macroeconomic uncertainty," Discussion Paper Series 1: Economic Studies 2005,26, Deutsche Bundesbank, Research Centre. [Downloadable!]
  9. Yip, C.K. & Wang, P., 1989. "Alternative Approaches To Money And Growth," Papers 8-89-4, Pennsylvania State - Department of Economics.
    Other versions:
  10. Lawrance, Emily C, 1995. "Consumer Default and the Life Cycle Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 939-54, November. [Downloadable!] (restricted)
  11. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January. [Downloadable!] (restricted)
    Other versions:
  12. Zhang, Junxi, 2000. "Inflation and Growth: Pecuniary Transactions Costs and Qualitative Equivalence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 1-12, February.
  13. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August. [Downloadable!] (restricted)
    Other versions:
  14. Vegh, Carlos A., 1989. "The optimal inflation tax in the presence of currency substitution," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 139-146, July. [Downloadable!] (restricted)
  15. Weil, Philippe, 1993. "Precautionary Savings and the Permanent Income Hypothesis," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 367-83, April. [Downloadable!] (restricted)
  16. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March. [Downloadable!] (restricted)
  17. Seth B. Carpenter & Joe Lange, 2003. "Money demand and equity markets," Finance and Economics Discussion Series 2003-03, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  18. Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October. [Downloadable!] (restricted)
  19. Dutkowsky, Donald H & Foote, William G, 1992. "Intertemporal Substitution in Macroeconomics: Consumption, Labor Supply, and Money Demand," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 333-38, May. [Downloadable!] (restricted)
  20. Robert Holzmann & Steen Jørgensen, 2001. "Social Risk Management: A New Conceptual Framework for Social Protection, and Beyond," International Tax and Public Finance, Springer, vol. 8(4), pages 529-556, August. [Downloadable!] (restricted)
  21. Isabel Correia & Pedro Teles, 1999. "The Optimal Inflation Tax," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(2), pages 325-346, April. [Downloadable!] (restricted)
    Other versions:
  22. Barr, D G & Cuthbertson, Keith, 1991. "Neoclassical Consumer Demand Theory and the Demand for Money," Economic Journal, Royal Economic Society, vol. 101(407), pages 855-76, July. [Downloadable!] (restricted)
  23. Cuthbertson, Keith, 1997. "Microfoundations and the Demand for Money," Economic Journal, Royal Economic Society, vol. 107(443), pages 1186-1201, July. [Downloadable!] (restricted)
  24. Choi, Woon Gyu & Oh, Seonghwan, 2003. " A Money Demand Function with Output Uncertainty, Monetary Uncertainty, and Financial Innovations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(5), pages 685-709, October.
Full references

Statistics
Access and download statistics

Did you know? RePEc also has a blog.

This page was last updated on 2009-11-8.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.