Financial Deregulation and the LM Schedule
A model is presented to determine the effect on the slope of the LM schedule of full deregulation of bank's interest rates on demand deposits. The opportunity costs of holding a bank deposits is analyzed and explicit consideration is given to the marginal costs of intermediation. Two popular demand functions for money are assumed: the double log and the semi-log functions. It is shown that a strong presumption exists that the slope of the LM schedule is steepened around the fixed full employment real interest rate. Only an unusual increase in the interest elasticity of the demand for money sufficient to offset the impact of other variables could upset this presumption.
Volume (Year): 18 (1992)
Issue (Month): 2 (Spring)
|Contact details of provider:|| Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA|
Phone: (201) 684-7346
Web page: https://www.quinnipiac.edu/eea/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goldfeld, Stephen M. & Sichel, Daniel E., 1990. "The demand for money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 8, pages 299-356 Elsevier.
- William Poole, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 84(2), pages 197-216.
- William Poole, 1970.
"Optimal choice of monetary policy instruments in a simple stochastic macro model,"
57, Board of Governors of the Federal Reserve System (U.S.).
- William Poole, 1969. "Optimal choice of monetary policy instruments in a simple stochastic macro model," Special Studies Papers 2, Board of Governors of the Federal Reserve System (U.S.).
- Michael C. Keeley & Gary C. Zimmerman, 1986. "Deposit rate deregulation and the demand for transactions media," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 47-62.
When requesting a correction, please mention this item's handle: RePEc:eej:eeconj:v:18:y:1992:i:2:p:129-132. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Victor Matheson, College of the Holy Cross)
If references are entirely missing, you can add them using this form.