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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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    Citations

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    Cited by:

    1. Alvarez, Fernando & Le Bihan, Hervé & Lippi, Francesco, 2013. "Small and large price changes and the propagation of monetary shocks," CEPR Discussion Papers 9770, C.E.P.R. Discussion Papers.
    2. repec:the:publsh:2821 is not listed on IDEAS
    3. Fernando Alvarez & Francesco Lippi, 2015. "Cash burns: An inventory model with a cash-credit choice," NBER Working Papers 21110, National Bureau of Economic Research, Inc.
    4. repec:bla:jorssa:v:180:y:2017:i:2:p:503-530 is not listed on IDEAS
    5. Guillaume Rocheteau & Pierre-Olivier Weill & Tsz-Nga Wong, 2015. "A Tractable Model of Monetary Exchange with Ex-post Heterogeneity," NBER Working Papers 21179, National Bureau of Economic Research, Inc.
    6. repec:eee:moneco:v:90:y:2017:i:c:p:99-112 is not listed on IDEAS
    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. Zeno Enders, 2017. "Heterogeneous Consumers, Segmented Asset Markets, and the Real Effects of Monetary Policy," CESifo Working Paper Series 6467, CESifo Group Munich.

    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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