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Technological change and the households' demand for currency

  • Lippi, Francesco
  • Secchi, Alessandro

It is shown that accounting for technology variations, across households and periods, is important to obtain theoretically consistent estimates of the demand for currency. An inventory model is presented where the withdrawal technology is explicitly modeled. Both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households. Empirical proxies for the household withdrawal technology, based on the diffusion of cash withdrawal points measured at city level, are used to test the model predictions on a panel of Italian household data over the 1993-2004 period.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 56 (2009)
Issue (Month): 2 (March)
Pages: 222-230

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Handle: RePEc:eee:moneco:v:56:y:2009:i:2:p:222-230
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. E.S. Andersen, 2007. "Innovation and Demand," Chapters, in: Elgar Companion to Neo-Schumpeterian Economics, chapter 47 Edward Elgar.
  2. Allan H. Meltzer, 1963. "The Demand for Money: The Evidence from the Time Series," Journal of Political Economy, University of Chicago Press, vol. 71, pages 219.
  3. Orazio Attanasio & Luigi Guiso & Tullio Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Households' Data," CSEF Working Papers 03, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  4. Puhani, Patrick A, 2000. " The Heckman Correction for Sample Selection and Its Critique," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 53-68, February.
  5. Fernando E. Alvarez & Francesco Lippi, 2007. "Financial Innovation and the Transactions Demand for Cash," NBER Working Papers 13416, National Bureau of Economic Research, Inc.
  6. De Fiore, Fiorella & Teles, Pedro, 2002. "The optimal mix of taxes on money, consumption and income," Working Paper Series 0135, European Central Bank.
  7. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
  8. Helmut Stix, 2004. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Empirica, Springer, vol. 31(2), pages 93-115, June.
  9. Daniels, Kenneth N & Murphy, Neil B, 1994. "The Impact of Technological Change on the Currency Behavior of Households: An Empirical Cross-Section Study," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 867-74, November.
  10. John V. Duca & William C. Whitesell, 1991. "Credit cards and money demand: a cross-sectional study," Research Paper 9112, Federal Reserve Bank of Dallas.
  11. Lucas, Robert E., 1988. "Money demand in the United States: A quantitative review," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 137-167, January.
  12. Mathias Drehmann & Charles Goodhart & Malte Krueger, 2002. "The challenges facing currency usage: will the traditional transaction medium be able to resist competition from the new technologies?," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 193-228, 04.
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