Financial Market Participation and the Apparent Instability of Money Demand
AbstractThis paper uses multi-period cross-sectional data on financial assets holdings to shed light on the postwar stability of money demand in the United States. I first present a new measure of the evolution of financial market participation, by relating participation to the extensive margins of money demand, and quantify the influence of wealth on participation decisions. I then relate the increase in participation to the period of "missing money" and to the subsequent higher interest rate elasticity of monetary aggregates. The paper indicates that time series estimations of money demand relationships are inherently flawed and tend to inappropriately suggest instability.
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Bibliographic InfoPaper provided by Swiss National Bank in its series Working Papers with number 2004-01.
Length: 39 pages
Date of creation: 2004
Date of revision:
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More information through EDIRC
Demand; Financial Market Participation; Cross-Sections;
Other versions of this item:
- Reynard, Samuel, 2004. "Financial market participation and the apparent instability of money demand," Journal of Monetary Economics, Elsevier, vol. 51(6), pages 1297-1317, September.
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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