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The demand of liquid assets with uncertain lumpy expenditures

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  • Alvarez, Fernando
  • Lippi, Francesco

Abstract

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.

Suggested Citation

  • Alvarez, Fernando & Lippi, Francesco, 2013. "The demand of liquid assets with uncertain lumpy expenditures," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 753-770.
  • Handle: RePEc:eee:moneco:v:60:y:2013:i:7:p:753-770
    DOI: 10.1016/j.jmoneco.2013.05.008
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    Cited by:

    1. Rocheteau, Guillaume & Weill, Pierre-Olivier & Wong, Russell, 2018. "A tractable model of monetary exchange with ex-post heterogeneity," Theoretical Economics, Econometric Society, vol. 13(3), September.
    2. Alvarez, Fernando & Lippi, Francesco, 2017. "Cash burns: An inventory model with a cash-credit choice," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 99-112.
    3. Heng Chen & Marie-Hélène Felt & Kim P. Huynh, 2017. "Retail payment innovations and cash usage: accounting for attrition by using refreshment samples," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 180(2), pages 503-530, February.
    4. Fernando Alvarez & Hervé Le Bihan & Francesco Lippi, 2013. "Small and Large Price Changes and the Propagation of Monetary Shocks," EIEF Working Papers Series 1318, Einaudi Institute for Economics and Finance (EIEF), revised Aug 2013.
    5. Guillaume Rocheteau & Pierre-Olivier Weill & Tsz-Nga Wong, 2018. "An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment," NBER Working Papers 25220, National Bureau of Economic Research, Inc.
    6. Zeno Enders, 2017. "Heterogeneous Consumers, Segmented Asset Markets, and the Real Effects of Monetary Policy," CESifo Working Paper Series 6467, CESifo Group Munich.
    7. Rocheteau, Guillaume & Rodriguez-Lopez, Antonio, 2014. "Liquidity provision, interest rates, and unemployment," Journal of Monetary Economics, Elsevier, vol. 65(C), pages 80-101.
    8. Herrenbrueck, Lucas, 2019. "Frictional asset markets and the liquidity channel of monetary policy," Journal of Economic Theory, Elsevier, vol. 181(C), pages 82-120.

    More about this item

    Keywords

    Money demand; Liquid assets; Lumpy purchases; Inventory theory;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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