Financial Innovation and Regional Money
AbstractThis paper studies the effect that financial innovation, which seems very prominent in recent years, has on money. Using Japanese regional data and the money demand specification, we first provide evidence of instability in the simple money-output relationship. However, when this relationship is extended to include a proxy for a comprehensive measure of financial innovation, the model is found to be stable. Furthermore, consistent with economic theory, evidence is obtained of financial innovation leading to decreased demand for liquid financial assets. In this respect, demand deposits seem to possess very similar characteristics to cash in Japan in recent years.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29194.
Date of creation: Jan 2011
Date of revision:
Regional money; panel cointegration;
Other versions of this item:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-12 (All new papers)
- NEP-MAC-2011-03-12 (Macroeconomics)
- NEP-MON-2011-03-12 (Monetary Economics)
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