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How Endogenous Is Money? Evidence from a New Microeconomic Estimate

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Author Info
Cuberes, David
Dougan, William
Abstract

This paper uses microeconomic data on firms’ money demand and investment in physical capital for the period 1983-2006 to estimate the extent to which variation in the U.S. money supply is an endogenous response to variation in firms’ demand for liquidity. We estimate a simple model in which each firm’s desired money balances in any period depend on that firm’s current transactions, current investment, and its planned future investment, as well as aggregate variables such as interest rates and common policy forecasts. Calculations based on our estimates suggest that only a very small fraction of the variability in the aggregate stock of money represents an endogenous response to autonomous changes in firms’ investment plans.

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File URL: http://mpra.ub.uni-muenchen.de/17744/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17744.

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Date of creation: Oct 2009
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Handle: RePEc:pra:mprapa:17744

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Related research
Keywords: Money demand; money supply; endogenous money; monetary neutrality;

Find related papers by JEL classification:
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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This page was last updated on 2009-12-8.

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