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The demand of liquid assets with uncertain lumpy expenditures

  • Alvarez, Fernando
  • Lippi, Francesco

We consider an inventory model for a liquid asset where the per-period net expenditures have two components: one that is frequent and small and another that is infrequent and large. We give a theoretical characterization of the optimal management of liquid asset as well as of the implied observable statistics. We use our characterization to interpret some aspects of households' currency management in Austria, as well as the management of demand deposits by a large sample of Italian investors.

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

Volume (Year): 60 (2013)
Issue (Month): 7 ()
Pages: 753-770

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Handle: RePEc:eee:moneco:v:60:y:2013:i:7:p:753-770
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  16. Peter Mooslechner & Helmut Stix & Karin Wagner, 2006. "How Are Payments Made in Austria?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 111–134.
  17. Sanford J. Grossman & Guy Laroque, 1987. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," NBER Working Papers 2369, National Bureau of Economic Research, Inc.
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