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money demand and futures

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  • Chiara Oldani

    ()
    (ISAE - Institute for Studies and Economic Analyses)

Abstract

This paper introduces a micro-model of portfolio utility to look at the effects of futures in the allocation process, starting from Lancaster-type utility model (1991), further developed by Glennon and Lane (1996) on money demand; results underline the role of portfolio substitution and crowding out of inefficient financial assets. The synthetic model can be represented by money and financial innovation, lowering the dimension of the assets from 3 to 2. Statistical evidences confirm the validity of assumptions for the US economy at a static level.

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File URL: http://lipari.istat.it/digibib/Working_Papers/WP_69_2006_Oldani.pdf
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Bibliographic Info

Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 69.

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Length: 40 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:isa:wpaper:69

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Keywords: futures; money demand model; utility; substitution.;

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References

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  1. Ingo Fender, 2000. "Corporate hedging: the impact of financial derivatives on the broad credit channel of monetary policy," BIS Working Papers 94, Bank for International Settlements.
  2. Hsing , Yu & Chang, Hui S., 2003. "Testing the Portfolio Theory of Money Demand in the United States," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 56(1), pages 13-21.
  3. Jürgen Von Hagen & Ingo Fender, 1998. "Central Bank Policy in a More Perfect Financial System," Open Economies Review, Springer, vol. 9(1), pages 493-532, January.
  4. Gary Gorton & Richard Rosen, 1995. "Banks and Derivatives," NBER Working Papers 5100, National Bureau of Economic Research, Inc.
    • Gary Gorton & Richard Rosen, 1995. "Banks and Derivatives," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 299-349 National Bureau of Economic Research, Inc.
  5. Javier Andres & J. David López-Salido & Edward Nelson, 2004. "Tobin's imperfect asset substitution in optimizing general equilibrium," Working Papers 2004-003, Federal Reserve Bank of St. Louis.
  6. P. A. Tinsley, 1998. "Short rate expectations, term premiums, and central bank use of derivatives to reduce policy uncertainty," Finance and Economics Discussion Series 1999-14, Board of Governors of the Federal Reserve System (U.S.).
  7. Catharina J. Hooyman, 1993. "The Use of Foreign Exchange Swaps by Central Banks - A Survey," IMF Working Papers 93/64, International Monetary Fund.
  8. Paolo Savona & Aurelio Maccario & Chiara Oldani, 2000. "On Monetary Analysis of Derivatives," Open Economies Review, Springer, vol. 11(1), pages 149-175, August.
  9. Shastri, Kuldeep & Sultan, Jahangir & Tandon, Kishore, 1996. "The impact of the listing of options in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 15(1), pages 37-64, February.
  10. Glennon, Dennis & Lane, Julia, 1996. "Financial innovation, new assets, and the behavior of money demand," Journal of Banking & Finance, Elsevier, vol. 20(2), pages 207-225, March.
  11. Hunter, William C. & Smith, Stephen D., 2002. "Risk management in the global economy: A review essay," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 205-221, March.
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